Why is it important to name a beneficiary on our life insurance policy?
A beneficiary is the person, charity or other organization that you name to receive your money or property from your life insurance policy, investment accounts or trust funds. For example: Mr. Anderson has a $30,000 life insurance policy and named his wife as the first beneficiary and his two children as the second beneficiaries. If Mr. Anderson dies before his wife does, then she will receive tax free, the $30,000 death benefit of his policy.
If Mrs. Anderson dies before Mr. Anderson does, then on Mr. Anderson’s death his two children will each receive $15,000 tax free from the death benefit on his life insurance policy.
If Mr. Anderson does not name a beneficiary and instead leaves the insurance death benefit to be paid into his estate, now the estate has an additional $30,000 of taxable income to pay in the final income tax return.
At the very least, not considering any additional income that Mr. Anderson has in his final taxation year, 15% or $4,500 of the $30,000 will be paid as income tax.
While $4,500 may not seem like a lot of money to pay in taxes; for the thousands of people I have assisted over the years, not one person has shared with me that they would like to pay more tax than is necessary to the government! Hence the importance of checking your beneficiary designations on your life insurances, investments accounts or trust funds to ensure that these designations are still appropriately reflecting your wishes.
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http://legacymatters.ca/wp-content/uploads/2016/05/Website-Header-1-300x100.png00Kathttp://legacymatters.ca/wp-content/uploads/2016/05/Website-Header-1-300x100.pngKat2014-06-17 10:54:042014-07-15 09:29:48The Importance of Naming a Beneficiary