As part of the process of figuring out who should be named a beneficiary on your life insurance, there are a number of things to consider. People may have multiple motivations when making these decisions that go beyond family members, trusts and charities, noted Edward Graves, author of “McGill’s Life Insurance.”
You might elect to name someone out of friendship, support of a common cause, personal respect for his or her accomplishments, or another reason you feel strongly about. Life insurance policies provide a useful way to fund a gift because a gift is not a part of public record, cannot go through probate and can be paid quickly and directly to your beneficiary.
“You can name just about anyone or anything a beneficiary,” said Marc Belletsky, Director of Estate and Business Planning for The Hartford. Belletsky says the most unusual beneficiary he’s come across in the course of his career was a beloved pet named “Fluffy.”
“I guess everyone thought this dog or cat was a person,” Belletsky said. “Unfortunately, it’s hard for a pet to cash a check.”
Although you have the right to name your pet as a beneficiary, Belletsky said that a much better way to care for them is to set up a pet trust or guardianship arrangement. This way, you can be sensitive to your other beneficiaries.
Other expense-related reasons can also play into why someone is named a beneficiary on a life insurance policy. Death benefit proceeds can supplement a retirement fund for a surviving spouse or be given to younger generations of children, grandchildren and great-grandchildren to pay for college.