Short Answer: Anyone
But there are some limitations. Look out for these:
- People Not Related to You – Typically you can leave your benefits to non-relatives, but in some states this is not allowed because those persons may not have “an insurable interest” in your life (a financial interest in the fact that you are alive). Check the rules of the state you live in.
- Minor Children – You can leave your benefits to children under the age of 18, but this can cause problems. If you die when they are still minors, they will not be able to receive the money yet, and it will go through what can be a lengthy and complicated court process. Be sure to inquire with your insurance agent/broker or do some research before you list your minor children as beneficiaries.
- “Husband” instead of “John Smith” – Try not to use the titles of people, like “husband,” rather than their given name, like “John Smith”. If you get remarried, the money could go to your EX-husband, which is probably not what you intended!
- “Children” instead of “Susie, Billy, etc.” – If you simply write “to my children,” this can be interpreted as including only the children that were alive at the time you wrote “children”. Be safe – use their full names and don’t forget to add any children born (or adopted) later!
- Your First Choice is Deceased – Be sure to provide a secondary (contingent) beneficiary, in case your first choice passes away before the benefits are paid.
- Non-U.S. Citizens – This is okay, but your benefits might be subject to unexpected taxes.
- Corporations or Other Entities – This is generally okay.
To Your Kidnapping Victim*
James Lee DiMaggio kidnapped 16-yr old family friend Hannah Anderson after murdering her mother and younger brother. When California police found him, he committed suicide (thankfully, Hannah was rescued safely). Turns out, DiMaggio had purchased a life insurance policy and named Hannah’s grandmother as the beneficiary – and it seems he intended the benefits to be used for Hannah’s welfare. Is this legal? Yes. While the scenario is bizarre and tragic, to say the least, he was allowed to leave his life insurance benefits to his kidnapping victim (or her grandmother). However, his policy may be void because he committed suicide.
To Michael Jackson’s Children
Michael Jackson left the proceeds of his $20 million life insurance policy to his estate (the beneficiaries of his estate are reportedly his children). Unfortunately, his children only received $3 million, because there was a question about his cause of death. If his death was caused by a drug overdose, the policy may have been completely void. So, before his cause of death could be determined, Michael’s clever estate administrators quickly settled the policy for $3 million. Smart thinking! Three million is better than zero.
*Not Recommended! Kidnapping is illegal. Do not kidnap.