Changing Your Life Insurance Beneficiary (And Why You Should Include A Cover Letter)

Posted by Ned Armand, President of Eastern Point Trust Company on Feb 11, 2015

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Important facts about changing your life insurance beneficiary to a trust – it might just save their life.

Key Takeaways

  • You can, and should, change your life insurance beneficiary to a trust by naming your trust as the sole beneficiary in your life insirance policy.
  • In the event that your life insurance policy is distributed, the amount that your policy is worth will be allocated and invested within your trust, which maximizes both its growth and effectiveness by behaving within the terms of the trust.
  • A cover letter can ensure that your policy is respected, and your beneficiary's rightful assets are prudently used, maximizing the effectiveness of your policy.

 

Tips To Maximize Your Insurance Policy's Effectivness

 

Don't Be Denied a Rightful Distribution From Your Insurance Company

Life insurance companies have been known to challenge death benefits payable to trusts established by the insured. The tactic is typically just a delay and the erroneous reason - usually cited by the insurance company - is the uncertainty that the insured actually created the trust or had intent for death proceeds to benefit the trust. Of course, this is despite the existence of properly executed beneficiary designation forms and trust documents. To ensure this issue does not arise for your heirs, we suggest you simply include a signed cover letter and summary of intent and forward it along with your Life Insurance Beneficiary designation form to the insurance company and your agent. Also, it is a good idea to provide a copy of the same letter to the Trustee of your trust.

Reasons Why You Should Include A Cover Letter

A cover letter can:

  • Establish you are of sound mind and free will
  • Provide clarification for the underwriter; it details a complete story for the insurer and their claims department.
  • Increase the speed at which the death benefit will be paid; and thus prevent delays to your family receiving assets.
  • Be kept along with the beneficiary designation form by the Trustee and Trust Beneficiary to clarify your intent.
  • Most importantly, ensure that your wishes are met.

It Is Worth The Extra Time

While the documentation process is an extra step, the last thing your grieving family and heirs will want to deal with is a faceless insurance company who is questioning your intent, or risk that a disgruntled heir has the opportunity to challenge your intention. A few minutes to clearly document your intent will avoid many possible complications for your surviving loved ones.

To see a sample change of beneficiary designation cover letter, click below.

Download Your FREE Sample Cover Letter!
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Tags: Life Insurance Trust, Beneficiary, Change Beneficiary

How to Avoid Challenges to Your Life Insurance Beneficiary

Posted by Ned Armand, President of Eastern Point Trust Company on Oct 24, 2014

Some life insurance companies have been known to challenge death benefits which are set up to be payable into trusts established by the insured. The reasons usually cited by the insurance companies are the uncertainty that the insured actually created the trust, or had intent for the death proceeds to be paid into the trust. Regretfully, this situation often occurs despite the life insurance company being provided the properly executed beneficiary designation forms and trust documents.  

How to Avoid the Problem

Life Insurance Beneficiary Trust

To ensure this problem does not happen to your heirs, we suggest you simply include a signed cover letter which summarizes your intent, and then forward it along with your beneficiary designation form to the insurance company, your agent and the Trustee. 

Benefits of a Letter of Intent

The following are several reasons why you should include a letter of intent: 

  •          It establishes that you are of sound mind and free will
  •          It clarifies your intentions to the underwriter and their claims department
  •          It increases the speed at which the death benefit will be paid, and thus                  prevents delays to your family receiving assets, and
  •          The letter ensures that your final wishes are met 

It is also a good practice to have a copy of the letter of intent and the beneficiary designation form kept with the Trustee and trust beneficiary to document your intent.

While this documentation process is an extra step, the last thing your grieving family and heirs will want to deal with is a faceless insurance company questioning your intent, or the risk that a disgruntled heir has the opportunity to challenge your intentions or actions. 

Protect your Heirs

Take a few minutes today to clearly document your life insurance death benefit intentions and you will reduce possible death benefit complications for your surviving loved ones. 

To learn more about advantages of an irrevocable trust and how to create one in order for those you designate to receive your future life insurance proceeds, click below.

Download Your FREE Example Beneficiary Designation Letter

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Tags: Life Insurance Trust, Beneficiary

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