5 Mistakes to Avoid When Naming a Life Insurance Beneficiary

Financial Horizons: Insights for Building Wealth and Securing Your Legacy

By Dr. Jose G. Cardenas, Chief Tax Strategist at The C & R Group, LLC

When it comes to life insurance, naming a beneficiary might seem straightforward—but it’s one of the most critical decisions you’ll make in your estate and financial planning. If you make the wrong choice or fail to think through the details, it could lead to unnecessary complications, delays, or even disputes when your loved ones need support the most. Let’s explore five common mistakes to avoid when naming a life insurance beneficiary and how to make sure your policy fulfills its purpose.

1. Avoid Naming a Minor Child

Many people instinctively want to list their children as beneficiaries. However, naming a minor can create legal hurdles. Insurance companies typically won’t pay out directly to a child, meaning the funds may be tied up in court until a guardian is appointed. Instead, consider setting up a trust or appointing a custodian under the Uniform Transfers to Minors Act (UTMA).

2. Not Being Specific Enough

If you simply write “my children” or “my family” as beneficiaries, you leave room for interpretation. Specificity matters. Name individuals directly and clearly indicate their share of the benefit. For example: “50% to John Smith, 50% to Jane Smith.” This reduces disputes and ensures your intentions are honored.

3. Not Specifying Conditions for Multiple Beneficiaries

Life doesn’t follow a script. What if one beneficiary predeceases you, or what if circumstances change? Without conditional instructions, your insurance payout could get stuck in probate. Always define how the benefit should be distributed if one or more named beneficiaries cannot accept it.

4. Doing Estate Planning Yourself

DIY estate planning is tempting, but life insurance beneficiaries intersect with tax laws, probate courts, and long-term financial planning. A professional advisor can help you integrate your policy with your broader estate strategy. At The C & R Group, we align life insurance with Expert Financial Analysis (EFA) and proactive tax planning so nothing falls through the cracks.

5. Not Naming a Contingent Beneficiary

A contingent beneficiary acts as a backup if your primary beneficiary passes away or cannot receive the payout. Without this safeguard, your death benefit could be delayed and possibly routed through probate. Think of it as building redundancy into your financial plan—just like the military builds redundancies into every mission.

Final Thoughts

Life insurance is meant to provide certainty, not confusion. Avoiding these five mistakes ensures that your loved ones receive the financial security you intended. Work with a trusted advisor to review and update your beneficiary designations regularly. Life changes, and your insurance plan should evolve with it.

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About the Author

Dr. Jose G. Cardenas is a retired U.S. Army Finance Officer and the Chief Tax Strategist at The C & R Group, LLC. With a Doctorate in Business Administration and over 20 years of experience in financial strategy, tax planning, and life insurance, Dr. Cardenas helps individuals and business owners protect their wealth and build a legacy. Learn more at www.thecrgroupllc.com.

📌 Disclosure:
This article is for educational and informational purposes only and is not intended to serve as personalized legal or investment advice. Dr. Jose G. Cardenas, DBA, provides tax advisory services through The C & R Group, LLC. Insurance strategies, including Indexed Universal Life (IUL) and annuity products, may be offered through his role as a licensed financial professional affiliated with Experior Financial Group.