What Should Single Parents Consider When Selecting a Beneficiary?

If you are a single parent then you are already pulling double duty most weeks and days, when you have your children in your care. But, what would happen if their go-to parent (you) were not available anymore? Say that the term life insurance policy had to pay out. Then, who would you have them turn to for financial stability, and guidance? For most married couples they have a natural go-to person -- each other.

In your case, it is an extremely important decision that is worth the time reading the fine print and care to consider the people whom you would most like providing your child's upbringing and financial sustenance. In the case of term life insurance, that policy is quite important, because it often includes money to pay funeral costs, or even the mortgage. Thus, it is important to choose responsible people as your beneficiaries.

Making No Decision

If you do not choose, then, if you have a will, it goes into probate, and the heirs get whatever is deemed fair by law. This may not be most beneficial to your children. When your children are still minors, and are beneficiaries then the court appoints a guardian for you. This court-appointed guardian will receive the money on behalf of your children. They are also going to hold the money for them as well. If your primary purpose was to provide reassurance that your children would be given the money, but through an adult you trust, that is essentially lost.

Instead, take the time to realize that you need to choose a beneficiary because that is potentially going to create the most favorable outcomes for your children. Though, it is best to consider the various kinds of beneficiaries, such as primary, contingency beneficiaries (also known as secondary beneficiaries.) The primary are the ones that most people assume are the only.

Choose Many Beneficiaries

Beyond deciding among the many people whom you trust, such as your parents, or siblings, make sure you have a contingent beneficiary. This is a precaution just in case that your primary beneficiary dies before the benefits of your term life insurance policy are parsed out properly. In some cases, they may even pass away prior to you. Many parents will name their children as the contingency beneficiaries.

The truth is that many people include their children among the beneficiaries, to provide something for everyone. Though, there really needs to be an adult in place who is responsible for ensuring that bills and necessities are paid with the money. However you want to divide up the money, make sure that you spell it out for your beneficiaries in a way that is recognized by the insurance company. This will prevent any types of misunderstandings, and also fights among your family and friends, who may be emotionally charged following your passing.

Make sure that you consider even picking a third tier level of beneficiaries. If, for instance, your parents are the primary beneficiaries, and your eldest child is your secondary beneficiary. If you go on vacation with your eldest child, and your parents, and you all pass away, it may leave behind your other children. A tertiary beneficiary could step in in this case to take responsibility for your younger children.

Single parents need to consider the worst case scenario, and designate multiple people as beneficiaries. Take the time to also understand that there are revocable and irrevocable beneficiaries. Irrevocable need to agree in writing to stop being the beneficiary. Revocable means that you keep control so that you may change beneficiaries at any time.

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