Who are the legitimate heirs of a life insurance policy?
Who are the legitimate heirs of a life insurance policy?
Life insurance takes effect after the death of its policyholder, at which point it pays out a lump sum to the designated beneficiaries. But who are the legitimate heirs of a life insurance policy? There are two main factors that determine this: the terms of the policy and state law.
When you apply for life insurance, the insurer will ask whether there's anyone who should be paid out in the event of your death. You can include spouses, children, close relatives, friends, or whoever else you'd like—as long as they're named beneficiaries on your policy. If you don't include anyone or only name yourself as beneficiary, then anyone can make a claim on your estate when you die (unless you have a last will and testament).
If there are multiple people listed as beneficiaries and no expressed desire for how to split up any payout among them, then state law comes into play. In most states, it's mandated that inheritance is divided equally among any number of beneficiaries; if there are three kids and a spouse with no expressed preference for division among them, then each sibling gets one-third and the spouse gets one-third. If there is an expressed desire to divide up payouts in some other way, then those wishes supersede state law and those people will have division.
Life insurance policies are a great way to give your loved ones the financial security they deserve, but it's important to know that the people you designate as potential heirs can have a huge impact on the money you leave behind. Too often, people name their spouse as the primary beneficiary of their life insurance policy without considering what would happen if something should happen to them. You need to make sure that your wishes are being followed through so that you don't end up with unintended consequences.
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Disclaimer: This is not legal advice and is simply an answer to a question and that if legal advice is sought to contact a licensed attorney in the appropriate jurisdiction.
