The Costs of A Bad Beneficiary

by Apr 15, 2016

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No one likes to think about naming beneficiaries, but it is critical when it comes to securing benefits and one that can have negative consequences. To avoid making a mistake, take time when naming a beneficiary by being sure to do the following:

  • Naming a primary AND a contingent beneficiary, failure to do so will result in legal costs sustained in court.
  • Review your beneficiary information every couple of years as your choice of beneficiary may change as your life changes.
  • Be sure to understand tax exposure – estate or inheritance taxes can eat away at an estate, so be certain when you name your beneficiary there is not a tax consequence.
  • Name an informal trustee to oversee cases in which minors are the named beneficiary.
  • Do not name a “permanent dependent” as a beneficiary, such as a special needs child, or aging parent. As little as $2,000 can cause them to lose their Supplemental Social Security or Medicaid.
  • Do not assume your “Will” executed through your attorney will also handle your life insurance, it will not. Your life insurance beneficiary arrangement works outside of your Will.
  • Communicate that the policy exists and what your intentions are to ensure your wishes are realized.
  • Do not assume benefits have to be distributed in a lump sum. You can set up with the insurance company to pay your beneficiaries as you see fit and thereby avoid poor planning by the beneficiary that might result in impulsive spending.

If you have questions email Kyle at or call 203.698.9342.

Written by: Steve Shepard

Founder/Principal, Shepard Insurance Group. At Shepard Insurance Group we begin every relationship with a face to face meeting with the client. In a comprehensive discussion of coverage needs, personal concerns, objectives and finally appetite for risk, we can arrive at the proper insurance solution. Understanding the client is the first step to accurate execution.

April 15, 2016

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