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So a friend suggested I make a thread to pull together some of the things I've been yelling about regarding life insurance.
In the same lane as all the other "queer, trans, and other vulnerable folks, get your paperwork together before things get any worse" discourse:
In the same lane as all the other "queer, trans, and other vulnerable folks, get your paperwork together before things get any worse" discourse:
First, if you have life insurance, NAME A BENEFICIARY. NAME 2 OR 5 IF YOU WANT. BUT NAME SOMEONE.
If you don't, it goes by plan default. This is almost always spouse, then children, then parents, then estate. Sometimes siblings before estate. It's up to the folks who write it.
If you don't, it goes by plan default. This is almost always spouse, then children, then parents, then estate. Sometimes siblings before estate. It's up to the folks who write it.
If you're married but you don't know if that marriage will stay valid, then you need to NAME A BENE. Name your spouse. If you have kids but adoption or 2nd parent adoption might be on the Supreme Court docket, name your kids. (We'll come back to if they're minors)
If you are single, no kids, that means it defaults to your parents. Many of us do not have good relationships with one or both parents. That default is going to be a 50/50 split unless one parent died before you did, or disclaims the benefits willingly.
benefits paying to estates are just complicated. Someone has to be named as executor of your estate. That might cost them a ton of money and time depending on your state and net worth. It's likely to be your next of kin (NOK) anyway.
So. Name a bene. It can be anybody. Provide their DOB and SSN if you can, or contact info, on the designation. You can name a friend, a church, an animal shelter. If you are choosing a bene it does not have to be family. My partner is my primary but my contingents are friends.
You can have more than one primary. Most plans you can split it unevenly (80/20 for instance) if you specify but by default it would be even (50/50, or 20/20/20/20/20 if you name 5, etc). If all your primaries died before you did, then it goes to contingent(s)
Let's loop back to minor benes. If you name your kids and they are minors when you die, there are a couple options, again, depending on your state and the amount. One if for the ins company to hold it for them until they turn 18. It will gain interest, they can just call and
claim it once they are of age.
Or. An adult can go through court for Letters of Guardianship. This is not the same as custody. It is guardianship over the child's finances. It requires a judge's order. It can be a whole different person than who has custody.
Or. An adult can go through court for Letters of Guardianship. This is not the same as custody. It is guardianship over the child's finances. It requires a judge's order. It can be a whole different person than who has custody.
Both of those should always be an option. The 3rd depends on state and amount. In some states, for small amounts (usually under 10k, you should look up your own state law), any related adult can do a UTMA. Uniform Transfers to Minors Act.
It means any fairly close adult relative (usually parents, gparents, aunt/uncles, cousins) can ask the benefits be paid to them on behalf of the child. I have mixed feelings about this. Sometimes it's a blessing, we can just send a check to a young mom who's going to use that
money to feed her kid, without it being complicated. Sometimes we issue a payment bc it's the law and they did everything correctly but deep in your gut, you feel that kid is not going to benefit from that money.
As I said, research the laws in your state.
As I said, research the laws in your state.
Ok, let's talk funeral homes (FH). When someone dies and you think you're their bene but you can't pay for the funeral up front, you can sign an assignment (FHA). READ IT FIRST. It should be a document that states you are assigning X amount of your benefit to pay to the FH.
It should provide a specific amount! If there's no number, insist they put the amount you agreed to.
It should name the policy, either by policy number, or by provider! They should not be able to send it to 2 different ins companies if there were 2 policies & get paid twice.
It should name the policy, either by policy number, or by provider! They should not be able to send it to 2 different ins companies if there were 2 policies & get paid twice.
Some have power of attorney (POA) on them. Up to you if you want to sign that. I will say if it's a bigger company it's usually fine, I would be more wary of independent FHs that want POA bc they usually don't need it. The companies who do this all the time (funding comps)
ask for it bc they are efficient as fuck and want to be able to complete the form if they need to, so they get paid and YOU DO TOO.
Local FHs seem to come in 2 flavors. "We are just helping out" FHs are wonderful to work with. They try to streamline everything and they're good.
Local FHs seem to come in 2 flavors. "We are just helping out" FHs are wonderful to work with. They try to streamline everything and they're good.
But the other flavor is pushy, asking us the total amount so they can add to the bill. We don't tell them, btw. That's why you want a specific amount on the FHA. We can only tell them if we can pay that. If your bill is $7k but your benefit is $100k? We'll say "$7k is covered."
Once we get our docs (usually your form and the death cert) in, we'd mail them a check for $7k, and pay you the other $93k directly.
If they have POA, we can send them forms to complete for you. That doesn't entitle them to any more money! It just means they fill it out.
If they have POA, we can send them forms to complete for you. That doesn't entitle them to any more money! It just means they fill it out.
That form is really just "I do/don't owe backtaxes, here is my basic personal info, I choose check or direct deposit, if the latter, here's a voided check."
We ask about taxes bc the INTEREST we pay might be taxable. Life ins benefits are generally not taxable.
We ask about taxes bc the INTEREST we pay might be taxable. Life ins benefits are generally not taxable.
So, you have that $100k coming to you. Bc of mail delays or a wrong address, it takes us a month to issue your payment after the person died. You pay no tax on the $100k. But your actual payout is, I dunno, $100,123.45, bc we calculated interest for that month we were processing.
The $123.45 is probably taxable, and if it is, we're going to mail you a 1099 for it next January, automatically. The actual tax you're gonna pay is pretty negligible compared to the benefit.
Alright y'all I'm going to stop here, but I'm probably down to answer questions if you've got them.
