AVOID COSTLY BENEFICIARY BLUNDERS

Carefully choosing a beneficiary for your life insurance policy and keeping the information up to date will save loved ones time, heartache and money later. "It may be an awkward five-minute conversation to have with your beneficiary, but it certainly beats the hours and hours they may spend tracking information down after the fact," says Craig Lemoine, assistant professor of financial planning at The American College in Bryn Mawr, Pennsylvania. Here's how to help avoid common and potentially costly beneficiary blunders. Update as relationships change. It's not just birth, death, divorce and marriage that call for beneficiary updates, Lemoine says. If you have children who are no longer minors, you can name them as direct beneficiaries of a policy or fund rather than putting the money in the hands of a guardian or trust. Also consider the health of aging relatives. If a beneficiary has a condition that causes cognitive impairment, such as Alzheimer's, you might better provide for that person by naming a different beneficiary and making provisions for the person's care in your will. Be specific. Don't be vague about the beneficiary in an attempt to avoid having to update the information later, Lemoine says. "Sometimes people name 'my children' or 'my siblings,' and that can cause problems," he says. Being specific when naming your beneficiary may eliminate future legal challenges and confusion. Be cautious when naming yourself or your estate. When people name themselves or their estate as beneficiaries, the money becomes part of the insured's general estate, which leaves it subject to potential taxation as well as seizure by creditors. In addition the death benefit may not be distributed in accordance with the insured's true wishes. Consult your lawyer and tax advisor for help determining what beneficiary designation will best fulfill your wishes. To learn more about what life insurance can do for you, visit statefarm.com.