Organizing your records and telling your family members about where important documents are, is a gift to your family. After you have passed, they’ll appreciate not having to go on a scavenger hunt to find out where your assets, including your life insurance policies, are located. This recent article from The New-Enterprise, “Relieve your loved ones of a huge burden by being proactive, and organized,” offers a great checklist that you can use to start getting organized.
Keep your insurance policies (and a record of them) in at least two places where they’re safe and easily accessible. That will reduce any delays in processing the life insurance. However you shouldn’t keep life insurance policies in a safe deposit box because it’s required to be sealed temporarily upon the death of the owner. Storing your life insurance policies in safe deposit box will create a delay in the settlement of the life insurance proceeds. Here’s a list of the information to keep. For every policy, list:
- The name of the issuing insurance company;
- The address of the issuing company;
- The name and U.S. headquarters of the group, if the issuing company is part of a group of companies;
- The policy number;
- The date the policy was issued;
- The amount of the death benefit;
- The contact info of the agent/broker who sold you the policy;
- The type of life insurance policy issued; and
- Where the original life insurance policy is located.
In addition, set out these directions on how to file a claim, when the time comes:
- Obtain multiple copies of the death certificate;
- Contact the insurance agent or the company to complete the necessary forms; and
- Submit the policy claim along with a certified copy of the death certificate.
It doesn’t usually take very long for the settlement to be issued once you’ve submitted the claim. You’ll normally be able to receive the distribution of life insurance proceeds in one of the following options:
- A lump sum;
- A specific income provision, which is payments of both principal and interest made on a predetermined schedule;
- A life income option, which is a guaranteed income for life (the amount depends on the death benefit, beneficiary’s gender and age at the time of the insured’s death); and
- An interest income option, where the insurance company holds the proceeds and only pays interest on them, with the death benefit going to a secondary beneficiary at your death.
It may not be the most fun way to spend a few hours, but by getting your insurance policies and other documents organized, you’ll spare your family stress and potential problems after you have passed. Don’t forget to do the same with your estate planning documents, and if you don’t have one in place, speak with an estate planning attorney to also take care of that detail.
One issue that many parents with minor children don’t realize is that life insurance proceeds will be given to their children at age 18. If a parent passes away with minor children named as the beneficiaries, a conservator for that minor child will have to be appointed by the court. To avoid the long drawn out process of a conservatorship, a much better option would be to name your revocable trust as the beneficiary of your life insurance policy, so that a successor trustee will invest and be in charge of those funds until your children reach a predetermined age. This process not only avoids the time, hassle, and expenses of a conservatorship, but also protects your children from spending those funds unwisely. Contact the Soto Law Firm today to discuss how you can protect the life insurance proceeds for your children’s long term benefit.
Reference: The (Elizabethtown, KY) New-Enterprise (September 22, 2018) “Relieve your loved ones of a huge burden by being proactive, and organized”