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Selecting Beneficiaries for Your Mortgage Term Life Insurance

Understanding Beneficiary Designations

When choosing a beneficiary for your Mortgage Term Life Insurance, you don’t have to choose the person or persons who will be managing your estate after your death. If you’ve named your spouse or child as the executor of the estate, then you do not have to name that person or the estate as the beneficiary of your Mortgage Term Life Insurance policy. You have the freedom of choosing anyone you want to inherit the proceeds from your policy as your beneficiary. You can set up a trust and make the trust your beneficiary, you can split the proceeds up among your children, or you can leave it all to your spouse.

It is important that you also name a contingent beneficiary on your Mortgage Term Life Insurance policy in order to make distributing your death benefit easier in the event of the death of your primary beneficiary. Be sure to list the social security numbers for all beneficiaries you name and the percentage of your death benefit you want them to have.

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Understanding Per Stirpes and Per Capita

When you name your Mortgage Term Life Insurance beneficiaries, there are some special instructions you can give in order to direct how funds are to be distributed in the event that your primary beneficiaries die before you and no contingent beneficiaries are named.

Per Stirpes (pronounced stir-peas): When you name your beneficiaries as per stirpes, then you are directing that your Mortgage Term Life Insurance death benefit proceeds be paid to the branch of your deceased relative in the same percentage you had originally deemed. That amount is then split equally among the people in that branch. For instance, if you name Jim and Sally as 50/50 beneficiaries and Sally dies, Sally’s branch will still get only 50% of the death benefit.

Per Capita: Naming your beneficiaries per capita means that, if they die before you, the death benefit proceeds are split equally among all members of the deceased beneficiaries' branch and the surviving beneficiary. So, if you’ve named Sally and Jim 50/50 beneficiaries and Jim passes away, leaving four children behind, Sally will not get 50% of the death benefit, but instead will receive 20% since it must be split five ways.

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Updating Beneficiaries Through the Years

As you age, you will go through many different experiences in your life. These experiences can affect the validity of your named beneficiaries on your Mortgage Term Life Insurance and may require you to change them.

Divorce: If you’ve named your spouse as your primary beneficiary and you go through a divorce, you may decide to remove your ex-spouse as your primary beneficiary. Instead, you may wish to name your children, parents, siblings, or estate as your primary beneficiary.

Death: When the primary beneficiary of your Mortgage Term Life Insurance dies, your contingents become your primary. But what if your contingent beneficiary passes away? You will need to update your beneficiary elections after the death of a contingent beneficiary.

Dissolution of a Charity: If you’ve named a charitable organization as your beneficiary, then you need to stay on top of changes within the organization. If they dissolve or merge with another similar charity and create a different name, then you need to update your beneficiary designations to reflect the changes.

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Charitable Donations as a Beneficiary Option

Mortgage Term Life Insurance policies afford you tremendous flexibility in terms of naming your beneficiaries. You can name anyone from your parents or your spouse, to your siblings or children. You can also name a trust or an estate as the beneficiary. Another beneficiary option for your Mortgage Term Life Insurance is to name your favorite charity.

If you are concerned about leaving a legacy that surpasses that of your family’s longevity, then making a charitable donation with the proceeds of your Mortgage Term Life Insurance policy can be a good option. When you name a charity as your beneficiary, you can leave the rest of your estate to your family and simply use the proceeds of the life insurance policy as the long-term support mechanism for a charity that has touched your life.

You can even choose to leave just a portion of your Mortgage Term Life Insurance death benefit to the charity by simply awarding it a percentage of your death benefit, rather than the entire amount.

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