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CandleFocus Glossary Editor
An irrevocable beneficiary is an essential part of effective financial planning and estate planning. Initially, a beneficiary is typically designated when taking out a life insurance policy or a segregated fund contract. The individual or entity designated as the beneficiary receives the benefits or proceeds from the policy in the event of the policy holder’s death or disability.
In contrast to a revocable beneficiary, an irrevocable beneficiary is a more ironclad version of a beneficiary. Their entitlements are guaranteed and no changes can be made to the policy unless the irrevocable beneficiary agrees to it. A revocable beneficiary, on the other hand, can be removed or altered at will by the policy holder.
Irrevocable beneficiaries are quite common, and they are frequently used in estate planning. When children are named as irrevocable beneficiaries, their inheritance is protected and often used to secure payments for child support in case of the policy holder’s death. Other common naming of irrevocable beneficiaries includes a spouse in a second marriage, ex-spouses, friends, and close family members.
Irrevocable beneficiaries also offer other estate planning benefits. For example, if a life insurance policy is put into an irrevocable trust upon the policy holder’s death, the benefits or proceeds of the policy are passed directly to the irrevocable beneficiaries, avoiding the additional costs and taxes associated with probate.
Given the protections and benefits of an irrevocable beneficiary, it’s essential for individuals to carefully consider the risks and consequences when making their designation. It’s important to have a thorough understanding of the name irrevocable beneficiary policies, regulations and obligations associated with the designation to ensure the best outcomes for all involved. An experienced lawyer can provide critical guidance and advice on how to best utilize an irrevocable beneficiary and the accompanying trust to mitigate estate taxes and ensure the policy holder’s wishes are respected.
In contrast to a revocable beneficiary, an irrevocable beneficiary is a more ironclad version of a beneficiary. Their entitlements are guaranteed and no changes can be made to the policy unless the irrevocable beneficiary agrees to it. A revocable beneficiary, on the other hand, can be removed or altered at will by the policy holder.
Irrevocable beneficiaries are quite common, and they are frequently used in estate planning. When children are named as irrevocable beneficiaries, their inheritance is protected and often used to secure payments for child support in case of the policy holder’s death. Other common naming of irrevocable beneficiaries includes a spouse in a second marriage, ex-spouses, friends, and close family members.
Irrevocable beneficiaries also offer other estate planning benefits. For example, if a life insurance policy is put into an irrevocable trust upon the policy holder’s death, the benefits or proceeds of the policy are passed directly to the irrevocable beneficiaries, avoiding the additional costs and taxes associated with probate.
Given the protections and benefits of an irrevocable beneficiary, it’s essential for individuals to carefully consider the risks and consequences when making their designation. It’s important to have a thorough understanding of the name irrevocable beneficiary policies, regulations and obligations associated with the designation to ensure the best outcomes for all involved. An experienced lawyer can provide critical guidance and advice on how to best utilize an irrevocable beneficiary and the accompanying trust to mitigate estate taxes and ensure the policy holder’s wishes are respected.