Death is never an easy topic to think about, but it's something we all need to prepare for. Along with a will, you need to designate a beneficiary, or someone who will get your life insurance money in the event of your death. Not sure who to pick? Here are some tips to help you choose the right beneficiary.
Think of your kids. The first people you should consider as your beneficiaries are your children. They're the ones that depend on you the most. And they're the ones that will be hit the hardest if you die. Without a parent there to support them, your children will need to have their basic needs provided for, such as food, clothing and shelter. They'll need a college education eventually too. And if you have any children with special needs, make sure that their care will continue after you pass on. Ensure that you allot enough money to your children in the event of your death.
Remember that your spouse has obligations too. After your children have been provided for, you should also consider naming your spouse as a beneficiary (at least, in part). Your spouse will have to take over all of your financial responsibilities after you die. If you have a mortgage, a car payment, a personal loan or other financial commitments, don't burden your spouse with the extra debt. Instead, name him or her as a beneficial to your life insurance policy so that he or she will have more than enough money to live comfortably on after all of your own debts have been paid.
Take into account any other dependents you have. Your immediate family members might not be the only dependents you have. Is there someone else in your life that looks to you in order to have their own needs met? Perhaps you have an elderly family member who appreciates the extra money you send her way each month. Or maybe you have a sibling that has no one else to turn to but you for support. Make sure that you leave some money for the other people in your life that you provide for.
Designate some money to cover your debts. If you aren't married or if you don't want to leave your personal debts to your children or spouse, ensure that some of the money from your life insurance fund goes to cover your own debts. And you may not think so, but funerals are expensive too. Take the necessary steps to ensure that your funeral expenses will be covered out of your own pocket, and not your family's.
Consider donating some of your wealth. If, after naming all of your family members as beneficiaries, you still have some money left, consider donating it to a good cause. There are many charitable organizations out there that could use the funding. Who knows? You might even have a building, a park or an event named in your honor if your donation is substantial enough.
Ensure that you communicate your desires about the distribution of your life insurance money clearly to your lawyer or life insurance provider. You want to be sure that the beneficiaries you choose get the money that you left them.