Glossary
Beneficiary designation, defined
The written instruction on a policy or account that names who receives the money when the insured dies. It is a contract term, not a will: the insurer pays the named person directly and the proceeds bypass probate.
In practice
Because the form controls over a will, an out-of-date one is a common life insurance error: an ex-spouse still named, a child born after the form was signed, a parent who has since died. Naming a minor directly delays payment until a court appoints a guardian; a trust or custodial arrangement avoids that. Naming the estate pulls the money back into probate and exposes it to creditors. Review the form after every marriage, divorce, birth and death, and keep a copy with the policy. Some states revoke an ex-spouse's designation automatically on divorce and others do not, so do not rely on it.
A worked example
Suppose a man names his first wife on a $300,000 policy in his twenties, divorces, remarries and dies without changing the form. The insurer pays the first wife, as named. His will leaving everything to his second wife does not reach the policy proceeds. Hypothetical, to show the mechanism.
Applies to: Life Insurance