What Is a Revocable Beneficiary?

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Life Insurance Revocable Beneficiary DefinitionLife Insurance Revocable Beneficiary Definition

Key Takeaways

  • A life insurance beneficiary receives the death benefit from a policy, providing financial support after the policyholder's death.
  • You can easily change revocable beneficiaries, but irrevocable ones require the beneficiary's approval.
  • Consider a revocable beneficiary for flexibility and an irrevocable beneficiary for specific legal obligations or preventing unwanted changes.
  • When selecting the type of beneficiary for your life insurance policy, it's important to consider your situation and goals.
  • Seeking advice from a financial representative or legal advisor can help you make an informed decision on the right beneficiary type for you.

Life can take unexpected turns, and sometimes, these turns may make you want to change certain aspects of your life insurance. For example, you might want to change the beneficiary on a policy. Revocable beneficiary changes are relatively easy. But it's important to understand the different types of life insurance beneficiaries and when you can — or can't — change them. Here are some considerations.

What Is a Life Insurance Beneficiary?

A life insurance beneficiary receives the death benefit from a policy. This money can help them continue to live comfortably, pay off debt and avoid making difficult financial sacrifices. It's common for spouses to name each other as their beneficiary. However, you can also name other family members, a trust or someone else — it's up to you when you apply for a policy or change a beneficiary.

How Does a Revocable Beneficiary Differ From an Irrevocable Beneficiary?

The owner of a life insurance policy has control over the policy. The owner can make changes to the beneficiary designation, and in some cases, change the death benefit amount. Every policy provides for a revocable beneficiary. Choose a revocable life insurance beneficiary for easy adjustments over time.

Here's some information on how they differ.

Revocable Beneficiary

A revocable beneficiary is a more flexible option. It allows the policy owner to change the beneficiary on their policy without restriction. To make a change, the policy owner simply submits the request to the insurance company, and there's no need to notify or ask the current beneficiaries before proceeding.

Irrevocable Beneficiary

With an irrevocable beneficiary, the policy owner cannot change the beneficiary without written permission from the current beneficiary. The beneficiary can choose to allow the change, but there's typically no requirement to do so. Therefore, it might be wise to view this as a permanent arrangement.

Why Might You Choose a Revocable Beneficiary?

Understanding life insurance options can help enable you to get the right coverage for your needs. So, why might you choose a revocable beneficiary or an irrevocable beneficiary? A revocable beneficiary is a simpler option for the policy owner. You keep full control over the policy, so it's easier to change your beneficiary as life changes.

For example, you might buy life insurance when you're young, healthy and single, naming your sibling as the beneficiary. If you marry and have children later in life, you might want to update the beneficiary on your policy. Or, if you decide that it's best to leave those assets to a trust, you can likely do that, too.

For some people, an irrevocable beneficiary may be a better option. For example, say you were married and got divorced. If the divorce agreement said your ex-spouse must contribute to your child's expenses and buy life insurance in case of early death, you might want to be named as an irrevocable beneficiary. Doing so could prevent your ex-spouse from removing your name and switching the beneficiary to somebody else. On the other hand, there may be risks associated with naming an irrevocable beneficiary. If, for some reason, the beneficiary needs to change, you could be locked in and unable to determine who gets the death benefit of your policy.

Choosing the Right Beneficiary Type for You

When you get life insurance, considering the type of beneficiary that's right for your situation is important. If you're the policy owner, you might value the flexibility of a revocable beneficiary. On the other hand, you might like the idea of choosing an irrevocable beneficiary. To help you decide which type of beneficiary might be best for you, consider discussing your situation and goals with a financial representative or a legal advisor.

   Choose a revocable life insurance beneficiary for easy adjustments over time. Get a Life Insurance Quote  

Frequently Asked Questions

Can I name my minor child as a beneficiary?

Yes, you can name a minor child as a beneficiary, but it’s important to plan how the money will be managed. Life insurance companies typically won’t pay the death benefit directly to a child, so you may need to set up a trust or name a custodian to manage the funds until the child reaches adulthood.

Does naming a beneficiary override a will?

Yes, a life insurance beneficiary designation typically takes priority over your will. That means the person you name on your policy will receive the death benefit, even if your will says otherwise.

What happens when there are two beneficiaries on a life insurance policy?

If you name two beneficiaries, the death benefit is usually split equally unless you specify different percentages. If one beneficiary is no longer living or can’t be located, the full benefit may go to the surviving beneficiary or to a contingent beneficiary, if one is named.

Do you have to pay taxes on money received as a beneficiary?

Life insurance death benefits are generally not subject to income tax. However, if the benefit earns interest before it’s paid out, that interest may be taxable to the beneficiary.

Who should you never name as a beneficiary?

Avoid naming your estate or a minor child as a beneficiary unless you’ve made special arrangements. Doing so can delay the payout or result in the money being managed through probate or a court-appointed guardian.

Who is the best person to name as a beneficiary?

The best person to name depends on your goals and personal circumstances. Many people choose a spouse, adult child, or trusted family member, but you can also name a trust or organization if that aligns better with your wishes.

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IMPORTANT DISCLOSURES

Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.