When an employee enrolls in an employee group benefits plan it is important that they name a beneficiary to receive the proceeds of any life insurance benefits upon their death.
Why should I name a beneficiary?
By indicating a named beneficiary the employee protects their benefactor from receiving a reduced benefit due to estate taxes being applied. Designating a beneficiary allows the insurer to pay out the benefits under the life insurance policy to the beneficiary tax-free without the delay involved in settling the estate.
Whom can I choose as my beneficiary?
You can choose anyone as beneficiary. However, if a minor child is designated, it is important that you also appoint a trustee to hold the minor’s proceeds in trust until they reach the age of majority. If a trustee is not appointed, one will be appointed to act on behalf of the minor upon the employee’s death.
How often should one review their beneficiary designation?
It is important to review the beneficiary designation at least once a year, or whenever you have a major life event change such as getting married, divorced, or having a child. If not, this could result in your life insurance policy proceeds not going to the person you intended.
It is important to ensure the beneficiary knows of the election and, where possible, has a copy of the employee’s Enrollment Form.