Naming Beneficiaries: Common Mistakes to Avoid

You buy life insurance to protect the people you love. But if your beneficiary designation isn't set up correctly, the money might not reach them — or it might reach them in a way you'd never have chosen. These aren't hypothetical problems. They're among the most common beneficiary errors — and families often discover them too late.

Here's what to know, and what to get right.

What Is a Beneficiary?

A beneficiary is the person or entity who receives the death benefit when you pass away. You designate beneficiaries when you apply for coverage, and you can typically update them at any time as your life changes.

There are two types:

• Primary beneficiary — receives the benefit first
• Contingent (secondary) beneficiary — receives the benefit if the primary beneficiary has already passed or can't accept the benefit

You can name multiple beneficiaries and specify how the benefit is split between them.

Mistake #1: Naming a Minor Child Directly

If you name a minor child (someone below the age of majority — typically 18, though it's 19 or 21 in some states) as a direct beneficiary, most insurance companies cannot pay the death benefit directly to them. Instead, payment is usually held until a court appoints a guardian or conservator of the estate to receive and manage the funds on the child's behalf (or, in some cases, paid to a custodian under the Uniform Transfers to Minors Act). That court process can be slow, expensive, and controlled by someone you didn't choose.

Better approach: Name a trusted adult as beneficiary with a clear understanding that the funds are for the child, OR set up a trust and name the trust as beneficiary, OR use a custodial designation under the Uniform Transfers to Minors Act (UTMA).

Talk to an estate planning attorney if your minor children are the primary intended recipients of your benefit.

Mistake #2: Forgetting to Update After Life Changes

Life insurance beneficiary designations don't update themselves to match your wishes when your life changes. Common situations that require an update:

• Marriage or divorce
• Birth or adoption of a child
• Death of a named beneficiary
• Estrangement from a family member

A classic example is an ex-spouse who is still listed as beneficiary after a divorce. The beneficiary designation on the policy — not your will — controls who receives the payout. State law treats divorce differently: in many states, divorce automatically revokes an ex-spouse's designation on an individually owned policy, while in others the old designation stands until you change it. Either way, don't leave it to state law — update the designation yourself.

Review your beneficiaries annually, or any time a major life event occurs.

Mistake #3: Naming Your Estate as Beneficiary

When you name your estate as beneficiary, the death benefit goes through probate — the legal process of settling your estate. This can:

• Delay payment to your family for months or even years
• Expose the funds to creditor claims
• Potentially expose the proceeds to estate tax — though that depends on whether you held incidents of ownership in the policy and whether your total estate exceeds the federal estate-tax exemption (about $15 million in 2026), not simply on naming your estate as beneficiary

In most situations, naming a person (or properly structured trust) as beneficiary keeps the money outside probate and gets it to your family faster.

Mistake #4: Not Naming a Contingent Beneficiary

If your primary beneficiary has already passed away and you never named a contingent, the death benefit will likely go to your estate — see Mistake #3. Adding a contingent beneficiary is a simple step that acts as a safety net.

Mistake #5: Vague Descriptions Instead of Full Names

"My children" is not a legal beneficiary designation. List each beneficiary by full legal name, relationship to you, and date of birth so there's no ambiguity at claim time.

How to Review and Update Your Beneficiaries

1. Locate your current policy documents
2. Contact your insurance carrier or your Sahlman agent
3. Complete a beneficiary change form (most carriers have these online or can provide them)
4. Store the updated confirmation with your important documents

Your agent can walk you through this process. If you have an existing policy you purchased through us, reach out and we'll help you review your designations.

Don't Have Coverage Yet?

If you're still shopping, now is a great time to get a free quote. We'll walk you through the beneficiary designation correctly from day one — one less thing to fix later.

This article is for educational purposes only and does not constitute legal or financial advice. For complex estate planning situations, consult a licensed attorney.