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A Guide to Preparing Beneficiaries

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A Guide to Preparing Beneficiaries

So, you’ve decided to take the first steps toward setting your family up for financial stability after you’re gone—good job! The only question now is: How do you prepare your beneficiaries to handle the money you’ll be giving them?

The problem with gifting someone money—no matter where it comes from—is that you generally don’t get a say in how it is spent. And with life insurance, there can be a real danger in placing a large sum of money into someone’s hands overnight. The best thing to do, now that you have your policy in place, is to sit down for a conversation with those whom you’ll be blessing after you’re gone.

Here are two conversations you need to have with your beneficiaries:

Your Spouse

One of the great things about your new life insurance policy is that your spouse will be taken care of in the event of your death. But do they know how much they’ll be responsible for taking care of? Do they know how to access your policy, or even who the policy is through?

If the answer to those questions was “No” or “I don’t know”, it sounds like you need to have a talk. Here are some points to go over.

  • What company the life insurance policy is through
  • How much they’ll be receiving
  • How much debt, in all forms (credit, loans, etc.) will need paid off
  • How much should be used for burial expenses
  • Where policies are located (safe deposit box is your best option)
  • What is needed to claim the life insurance

It is a good idea to keep your life insurance policy information in a safe deposit box if possible. Also, make copies of the policy and store them in places away from your home like a locked desk drawer at your office. You should also keep a copy in a fireproof lockbox in your home.

In sharing this knowledge with your spouse, it will take a lot of the guess work out of accessing your insurance policy.

Your Children

Gifting money to your children is one of the best uses of your insurance policy. However, think of yourself at age 18, and consider whether you would have been responsible with $250,000-plus. It is safe to assume the answer would be, you wouldn’t be. And no matter how mature or intelligent your children are, no 18-year-old is responsible enough to manage such a large sum of money.

That is where a trust would come in handy. Beyond talking to your children about financial responsibility, a trust will allow funds to be managed wisely. Not only will the trust protect your children from themselves, but from others as well. Establishing a trust fund also insures that your assets go to the right people.

A trust can be used to specify provided money for college, for the future purchase of a house, and various other life-changing financial steps. You can even designate that a trust be distributed monthly, setting up your children with a steady additional income throughout their lives.

If setting up a trust, it would be beneficial to meet with an attorney to discuss the trust being added into your will. Establishing the trust in your will helps insure the trust will be properly managed to disperse the money responsibly to your children.

After setting up the trust, sit down with your children—given age appropriateness—and inform them of the plans you have made. Let them know how much they can plan to receive and exactly how it will be distributed. Also, urge them to be responsible with the money they’ll be receiving. After all, you aren’t leaving funds behind for them to waste it.


No matter how you have your life insurance policy beneficiaries designated, having a conversation with those you’re gifting money to will save a lot of guessing after your passing. Giving them the knowledge as to how much they’ll receive and how to access it will take one more burden off their plate after you’re gone.

If you have questions about life insurance options, or would like additional explanation of why life insurance is so important, contact Smallwood & Small today. Our expert agents are standing by to answer your questions. Call 304-263-3361 to talk to an agent at our Martinsburg office, or 304-229-7227 to reach our Inwood office. You can also visit our life insurance page for a quick quote.

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