It’s one of the simplest forms in planning, and yet one of the most overlooked.
A life insurance beneficiary designation might seem like a straightforward detail. A name, a relationship, a signature. Done.
But that signature can carry more legal weight than your will. More practical consequence than your trust. And when it’s wrong, or missing, the ripple effects can be devastating.
We’ve seen it happen. A former spouse receives a death benefit payout because no one updated the form after the divorce. A minor child is named directly, causing expensive and lengthy court intervention before any funds can be accessed. A trust carefully designed to protect an irresponsible heir goes unfunded because the beneficiary was named as an individual instead.
In every one of those scenarios, the policy performed exactly as designed. It paid a benefit. But it didn’t accomplish the plan.
Trust the Trust and Not the Person
When clients name a beneficiary, they often do so based on love or loyalty. But life insurance isn’t about sentiment. It’s about structure.
That’s why, in many cases, we recommend naming a trust rather than an individual, especially when the individual may not be equipped to manage a large sum, or when your estate plan involves minor children, special needs beneficiaries, or multigenerational goals.
One of the most common planning errors we see is naming an heir outright when the estate plan clearly intended for a trust to receive and steward the funds. In that moment, the beneficiary form overrules the plan. The trustee is bypassed. The protective structure is cut out. And the heir, ready or not, is left to navigate a lump-sum payout alone.
It’s not just about who you trust today. It’s about who will be in the best position to follow through on your wishes when you’re no longer here.
A Living Designation in a Living Plan
At Summit, we believe beneficiary designations are not a set-it-and-forget-it item. They’re a living part of a living plan.
Marriage, divorce, birth, death, business exits, changes in tax law, any of these should trigger a review. But even absent a major life event, we recommend revisiting beneficiary designations every few years, especially as the rest of your financial picture changes.
Why? Because life insurance is often the most liquid and immediate asset in your estate. It’s the first thing that gets paid, and often the tool used to fund everything else. Estate taxes. Business succession. Charitable goals. Multigenerational trusts. And if the payout goes to the wrong person, those other objectives may fall apart.
Real Stakes, Real Consequences
Let’s make it plain. If your beneficiary designations are wrong, here’s what could happen:
- Your ex-spouse receives your death benefit.
- Your minor child’s inheritance is tied up in court for months, or even years.
- Your adult child with spending issues burns through their inheritance in six months.
- The trust you created to protect your family gets zero funding.
- Your buy-sell agreement collapses because the policy paid the wrong party.
- Your charitable gift is never fulfilled because it was listed as contingent instead of primary.
Each of these has happened. And each was avoidable.
The Bottom Line
We’ve built our business on the belief that the details matter, especially the ones that are easy to miss.
When we conduct policy reviews, we don’t just check the numbers. We check the names. The structures. The intentions. Because the most tragic outcome isn’t a policy that didn’t pay, it’s a policy that paid the wrong person.
If it’s been more than a year since you reviewed your designations, or if your life, estate plan, or family dynamics have changed, now is the time.
We’re here to help you get it right.
Want to explore how life insurance might support your broader financial plan?
We’re here to walk through the details, review existing coverage, and help you evaluate what makes the most sense based on your goals. Reach out to schedule a conversation. No pressure, just perspective.
