Can you change your life insurance beneficiary?
Quick Facts
A life insurance beneficiary change is often needed following marriage, divorce, and other life changes and can be done at any time as long as the policy is active
With few exceptions, only the policy owner can make changes to your life insurance beneficiaries
The process of changing a beneficiary varies depending on whether you have a revocable or irrevocable beneficiary
The short answer to the question, “Can you change my life insurance beneficiary?” is yes, with several parameters. Knowing who can change the beneficiary on a life insurance policy is extremely important so that the policy functions as intended, should any changes need to be made.
Many life events can warrant a beneficiary change, including marriage and divorce, the birth or adoption of a child, purchasing a home, setting up a new trust for an estate plan, or the death of an existing beneficiary.
Understanding what a life insurance beneficiary is and how a beneficiary can be changed helps simplify this process and will empower you to make these major decisions.
What is a life insurance beneficiary?
A life insurance beneficiary is a person who receives the death benefit when you pass away. This is often a spouse, significant other, or dependents.
A life insurance beneficiary can also be an organization, trust, or other non-individual.
Some examples of non-individual beneficiary options include:
Your estate
A charitable organization that is meaningful to you
A legal entity, like your business or company
A trust
Many people assume that life insurance is not for them because they do not have a spouse or children. However, if you are recently divorced or your spouse has recently passed away, consider these alternative options for making a lasting difference in a way that is meaningful to you.
It’s also worth noting that it often makes sense to designate multiple people or entities as beneficiaries and divide the death benefit based on the corresponding financial needs. Learn more about how to choose a life insurance beneficiary below.
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Who can change your life insurance beneficiary?
As the policyholder, only you can change the beneficiary on your life insurance policy, with a few exceptions.
For example, if there is an irrevocable beneficiary listed on the policy or you live in a community property state, you may need the permission of another person before making this change. An individual you have given power of attorney may also change the beneficiary on your policy.
These circumstances are discussed in more detail below.
Irrevocable Life Insurance Beneficiaries
Changing the beneficiary is a little more complex if a life insurance policy has an irrevocable beneficiary designation. An irrevocable beneficiary cannot be removed or have their portion of the death benefit changed without their consent. Additionally, an irrevocable beneficiary must be notified if the policy is canceled.
So, why choose an irrevocable beneficiary? Sometimes, you might use one to guarantee that a particular person or organization will receive the death benefit. However, keep in mind the difficulty associated with changing the beneficiary when you choose this for your life insurance policy.
Changing Beneficiaries in a Community Property State
Like an irrevocable beneficiary, spouses also have this type of decision-making authority in many states. A handful of community property states require the spouse’s permission to make a beneficiary change, including:
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
In a community property state, assets acquired during the marriage are considered equally owned by each spouse, and life insurance policies fall within the category of community property.
In this case, if the life insurance policy was purchased after you got married, you will need your spouse’s permission to name someone other than them as the beneficiary on your policy.
Revocable Life Insurance Beneficiaries
Suppose you do not have an irrevocable beneficiary on your policy and are investigating options for changing the current beneficiary. In that case, you are likely wondering who has the right to change a revocable beneficiary.
The good news is that “revocable” means you can change your beneficiary.
When can a policyholder change a revocable beneficiary? A beneficiary change can occur any time after the policy is in force. As long as the policy is still active and has not been paid out, you can request a change of beneficiary.
How to Choose a Life Insurance Beneficiary
Your beneficiary should be someone you trust to use the funds to take care of final expenses, debts, and ongoing bills like the rent or mortgage, childcare and higher education costs, and other important financial necessities once you die.
In most cases, you can select multiple beneficiaries, known as primary, secondary, and successor beneficiaries. The primary beneficiary is the person designated to receive the death benefit when you pass. A secondary beneficiary, often called a contingent beneficiary, will receive the death benefit if the primary beneficiary is deceased at the time of the payout.
Naming Your Children as Beneficiaries
Dependents cannot access life insurance benefits unless they are 18 or older. Minors will need to wait until they become a legal adult unless a guardian has been appointed to access the funds on their behalf.
Electing a guardian or setting up a trust are two ways to be sure the funds are used for your minor children’s needs. Learn more about how to name a minor child as a life insurance beneficiary below.
Appointing a Guardian
Appointing a legal guardian to manage a life insurance payout is a common way of designating minor children as beneficiaries. By selecting a guardian as the beneficiary on behalf of your dependents, the money must be used in their interest, and they are able to access the funds sooner than they otherwise would without a guardian.
The person who would take custody of your kids if you died is often the best person to designate as a guardian on your life insurance.
Establishing a Trust
Setting up a trust is another way to make sure the life insurance benefit goes to your children through the trust. While appointing a guardian only requires the potential guardian’s willingness, a trust generally has a cost associated with setup. Typically, fees are required upfront, and a trustee must be named to facilitate the payout.
Rather than receiving a single payout like most life insurance policies, a trust can disperse the death benefit at set times and in certain amounts you predetermine as the policy owner. However, just as a life insurance policy needs to be active at the time of death, a trust must also be in good standing for it to function as intended when you pass.
Helpful Tips for Heirs and Beneficiaries
As an heir or beneficiary, you are not required to stay with the deceased’s firm once the life insurance policy has been paid out. If assets or investments are involved, do your due diligence before adding new ones or making any transfers.
Potential tax Consequences for Changing Beneficiaries
Life insurance policies are not taxed when paid to a beneficiary, nor is the policy owner taxed for changing a beneficiary. However, in some cases, the life insurance benefit can be considered part of the policyholder’s estate and may be calculated as part of the taxable estate value.
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Final Thoughts on Changing a Beneficiary
Can you change your life insurance beneficiary? Life insurance is meant to protect those you care about most, so changing a life insurance beneficiary may be necessary after a divorce, when loved ones pass away, and any other significant life changes.
Reviewing your policy periodically is a proactive way to ensure that the designated beneficiary still makes sense for your current life circumstances. With only minimal limitations in most cases, the power to change your beneficiary at any time lies with you.
Frequently Asked Questions
Can a beneficiary be removed from a life insurance policy?
Yes, a beneficiary can be removed by the policy owner or someone the policy owner gave power of attorney.
Can you change life insurance beneficiaries after someone dies?
You can’t change beneficiaries after the insured person dies. If they died while a change was processing, the insurer decides who to pay out.
Can life insurance beneficiaries be changed at any time?
Yes, the policyholder can change their beneficiaries whenever they want, for any reason.
When do you need permission to change a policy’s beneficiaries?
If you live in a community property state you may need your spouse’s approval to name a beneficiary other than them. If you have an irrevocable beneficiary, you need their sign-off to remove them from your policy.
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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states.
After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in…
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Written by
Rachael Brennan
Licensed Insurance Agent
Benjamin Carr worked as a licensed insurance agent at State Farm and Tennant Special Risk. He sold various lines of coverage and informed his clients about their life, health, property/casualty insurance needs.
Assessing risks and helping people find the best coverage to suit their needs is a passion of his. He appreciates that insurance was designed to protect people, particularly during times…
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Reviewed by
Benjamin Carr
Former State Farm Insurance Agent
