A:  There are several options for naming beneficiaries on a life insurance policy.  You can have 100% of the benefits go to a single beneficiary, or name multiple beneficiaries and divide the proceeds among them in whatever manner you choose.

If you name only one “primary” beneficiary, you can name a “secondary” beneficiary, who’ll receive proceeds if the primary dies before payout.  It’s also possible to name a “tertiary” beneficiary, who gets the benefits if both primary and secondary pass.

If you name multiple beneficiaries, you can assign the benefits either “per stirpes” or “per capita,” so proceeds are distributed property if any beneficiary predeceases the policyholder.  With per stirpes, proceeds are divided equally among the beneficiaries and/or the surviving children of the predeceased beneficiaries.  For example, you name your son Mark and daughter Mary as beneficiaries.  If Mary dies before you, Mark would receive 50% of the benefits, and the remaining 50% would be apportioned equally to Mary’s children.

With per capita distribution, proceeds are divided equally among all surviving beneficiaries.  If Mark had no children and Mary had two, then the proceeds would be equally divided (33.3%) between Mary’s two children and mark.

But here’s the thing, it’s way smarter to name a trust as the beneficiary of your life insurance proceeds, and then have the trust indicate how the life insurance (and your other assets) should be split up.  A trust can keep what you leave behind protected from your beneficiary’s future divorce, creditors, or even bankruptcy.  A beneficiary designation cannot.

As your Personal Family Lawyer®, we’ll help you select the proper beneficiary option, so your insurance benefits are distributed exactly how you desire.