Who to name as beneficiary when dealing with Mortgage Protection and Life Insurance is important. It depends on the type of product, and what you need to use it for.
Inheritance Mortgage Protection
Your Mortgage Protection policy is assigned to the lender. They benefit in the event of your death, by your policy paying back your mortgage loan. this way, it goes straight to the creditor (your bank), without the delay of the probate process.
Inheritance Life Insurance
1. Assign your policy to a beneficiary – remember that a legal spouse doesn’t have an inheritance tax liability to pay
Life Insurance policies can be assigned to your spouse or your children. Unassigned the proceeds will go to your estate when you die. Be prepared for your life insurance payment to be delayed. The policy will likely get tangled up in probate and take some time to clear.
2. Remember to assign your Mortgage Protection policy to a lender. The lender won’t have to worry about inheritance tax. Your family will if it’s not going straight to the bank.
3. If you need your policy to pay tax. Like gift tax, or inheritance tax, you have to decide at the time you purchase. Otherwise it goes to your estate, and so you guessed it, there will be probate delays, and inheritance tax.