Having a life insurance plan can ensure that your family and friends are taken care of after your passing. For most people, it is an essential plan to ensure that your home, other properties, money, stocks, and miscellaneous assets are given to those you want to inherit them.
Typically, when naming a beneficiary in your life insurance, you believe they will survive you to earn the assets you pass on. However, there are circumstances where this may not be the case. You can list multiple primary beneficiaries in your plan or have a primary with secondary or contingent beneficiaries listed below them. This ensures that whatever you select will either go to the primary beneficiary or, if something happens, the contingent or secondary beneficiary.
It is essential that your life insurance plan is designed for any outcome, including one where a beneficiary might pass before you.
What Happens if the Sole Beneficiary Dies?
There must be at least one primary beneficiary named in a life insurance plan. In a situation where they pass before you, any death benefits will be passed on to the contingent or secondary beneficiaries named after them.
If no contingent beneficiaries are named, the benefits will be given to the placeholder’s estate. This will go through probate court. All assets will be examined, and if you have debts or student loans, the IRS might claim money from your estate. This process will allow family and friends to debate over assets and lead to items not being given to the right people or the government recouping the money.
What Happens if One of the Multiple Beneficiaries Die?
If you have multiple beneficiaries listed and one of them passes before you, the standard rule is that the death benefits that would have been given to said person would be redistributed to the rest of the beneficiaries. If you have co-beneficiaries, they will each get 50% of the benefits after you pass away.
There is a contingency that you can put in place in this case. If you plan for circumstances such as this, you can control how much of the split is given to the others. Let’s say you have three kids listed as your beneficiaries. If one of them passes before you do, you can insert a clause that sibling B will get 75% and sibling C will get 25% of sibling A’s share or vice versa. This gives you continuous control over the path of your assets.
What if You and Your Beneficiary Die at the Same Time?
While a situation like this may be hard to believe, if you have listed your spouse as your beneficiary and both of you die simultaneously, certain next steps are taken. If you both truly die at the same time, your death benefits will either be handed down to any listed contingent beneficiaries or, if none are listed, on your estate.
However, there are clauses to look out for. If a witness can claim your spouse was alive passed you, such as seeing them move or their breathing was a moment longer, your death benefits will be passed down to their estate. Then, the other way around, if you could be seen alive longer than your spouse, your benefits will be passed down to your contingent beneficiaries.
A life insurance plan is essential to ensure your assets are being passed down to the proper people. However, instances such as early deaths and unforeseen circumstances can prove that updating your beneficiaries, insurance, and planning for the unknown can keep your assets going to the intended heirs. For assistance creating the right plan for you or understanding your current plan, reach out to the team at Hartmann Law Office.