Double check – who’s your beneficiary?

BeneficiaryYour life insurance and retirement plans are in place, but have you designated a beneficiary?

In the event that you die, your life insurance will be paid out to your beneficiary or beneficiaries. However, if you have not designated a beneficiary, the payment recipient is determined by default according to the State of California hierarchy:

  1. Lawful spouse, if living; otherwise
  2. Natural or legally adopted children (in equal share) if living; otherwise
  3. Parents in legal share, if living; otherwise
  4. Siblings in equal share, if living; otherwise
  5. The personal representative of your estate

In the event you die, your retirement savings will be paid out as specified in the plan documents. Some plans pay out fully to your spouse, others partially to your spouse – regardless of whether or not your spouse is the named beneficiary.

Even if you are happy with the default recipient – for instance, you want your lawful spouse to get your money – you should still designate a beneficiary and keep that name updated. Payments will be delayed if the beneficiary is not specifically named.

About naming a minor child as a beneficiary

  • Minors may be named as beneficiaries, but be aware that this designation raises special issues which may delay a claim payment.
  • Because insurance proceeds cannot be released directly to a minor, the insurance company will need proof of a court-appointed legal guardian for the minor’s estate/property who can receive the insurance proceeds on the minor’s behalf.
  • Even a surviving parent who has custody or control of the minor’s well-being or living arrangements may not be authorized to collect assets on behalf of the minor. The court will ultimately decide who should be the guardian of the minor’s estate.
  • In some instances, state law may allow an insurer to distribute small benefit amounts (typically $10,000 or less) to an adult representative of the minor through the Uniform Transfers to Minors Act (UTMA).
  • There may be better alternatives to naming a minor as a beneficiary. Seek the assistance of an attorney to determine what options best match your intentions. An attorney also can assist in preparing what is known as “Letters of Guardianship” for the minor’s estate should you need them to petition the court.

To learn more and for beneficiary counseling, visit the life insurance and retirement sections on the Gateway, or call the HR Service Center. Also see this article on who receives the proceeds from your policy.

Contact the editors