Who should I name as my life insurance beneficiary - and what mistakes should I avoid?
Answered by Cheryl Heikka
Financial Strategist · Your One Agency
Name people (or a trust), not your estate - naming the estate can drag the payout into probate and potentially into estate-tax exposure. Don't name minor children directly; insurers generally can't pay a minor, so the money gets tied up in court-appointed custodianship - a trust or custodial arrangement solves this. Keep the policy's three roles aligned (owner, insured, beneficiary): when all three are different people, the IRS can treat the payout as a taxable gift, a known trap sometimes called the Goodman triangle. And review beneficiaries after every major life event - divorce, remarriage, births - because the beneficiary form, not your will, controls who gets paid.
The gap most people miss
The beneficiary form overrides the will - and outdated or mis-structured designations (the estate, a minor, an ex-spouse) are among the most common and most expensive estate mistakes.
A beneficiary review across all your policies and accounts takes one short meeting; the attorney circle handles the trust piece when it's needed.