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

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