Choosing a beneficiary for your will, trust, or life insurance policy might at first seem like a relatively simple task. For some, a specific person automatically comes to mind–someone they know, care for, and trust–and the decision is made. For others, though, the task can feel tedious. Depending on your financial circumstances, designating someone as beneficiary can place a significant amount of responsibility on the inheritor.
A Multi-Faceted Inheritance
Notice the word inheritor. Typically, the beneficiary of a will, trust, or life insurance policy is set to inherit something to their advantage. They receive benefits, profits, or funds from a particular account or policy, designated to them by whatever estate planning tool you choose to utilize. While this can certainly be a positive turn of events for the inheritor in the midst of your passing, it can still mean a lot of responsibility, as receiving funds can also mean receiving a burdensome responsibility.
Sadly, tense arguments and disagreements can arise between families and loved ones when a certain friend or family member inherits money. Decisions must be made by the recipient regarding any property, possessions, or monetary funds inherited, which can be emotionally and mentally taxing for anyone involved. While you cannot predict or control how everyone will interpret and respond to your choice of inheritor, you do have a say in who you would like to assign these responsibilities to, should you document your wishes well in advance.
Common Beneficiary Sequence Orders
In the state of Illinois, unless you select and name a specific person as beneficiary in a will, most insurance companies will pay death benefits according to a certain sequential order. For example, the death benefits would first be paid to your lawful spouse (if you have one). If there is no living spouse, next up would be your natural or adopted child in equal shares, then your parents in equal shares, followed by your brothers or sisters in equal shares, and so on. Finally, if no one in the sequence order is alive or applies to your situation, then the personal representative of your estate would inherit the benefits.
Generally, most insurance companies require that the designated beneficiary have an “insurable interest” in your life during the time you apply for the policy. Close family members are usually presumed to have insurable interest. If the beneficiary you choose is more distant in nature, such as a family friend or co-worker, the insurance company may decline death benefits if they deem the designation questionable in any way.
Contact a Lombard Wills and Trusts Lawyer
In order to ensure your wishes are carried out and that the beneficiary of your choice receives the benefits due to them, it is wise to work with a professional DuPage County estate planning attorney. We would be honored to help you make these arrangements. Call A. Traub & Associates at 630-426-0196 (Lombard), 847-749-4182 (Arlington Heights), or 312-528-3290 (Chicago South Loop) for a consultation today.