Avoid This Common Beneficiary Mistake – Part One

Many people make the mistake of naming their estate as beneficiary of their life insurance policy. The request is most common with single people and is especially common as a contingent beneficiary. Your estate does need money to pay for funeral and burial costs, unpaid medical bills, debts and to replace income. However, naming the actual estate poses significant problems.

First, any assets in your estate will go through the probate process. This is simply the process of “proving” your will through the court system. This takes an average of 6-9 months.

Second, attorney fees for handling the process are often based on a percentage of your total estate value. Death benefits going to a living person, business or trust bypass probate and go directly to your family upon receipt of a death certificate. Naming your estate will slow the transfer of assets and ultimately give a small piece of the death benefit to an attorney. Unless you come from a family of attorneys, why would you do this?

What’s the alternative? Name a living person, a trust (attorneys do get their cut here), a business or a charity. Those four allow 100% of the death benefit to pass in a timely manner according to your wishes.