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An irrevocable beneficiary is guaranteed to receive part of a life insurance policy’s death benefit.

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Life insurance is the only financial product that can immediately create an amount of money chosen in advance to be paid at the death of the insured.

Life insurance death benefits can provide funds to family members for living and education expenses. They can also be used to transfer wealth, protect business interests or support charities. The recipients of life insurance death benefits are the beneficiaries, designated by the life insurance policy owner.

There are some decisions to make when choosing a life insurance beneficiary or beneficiaries.

What is a beneficiary?

A beneficiary is a person named by the life insurance policy holder, who will receive the death benefit. It can be a specific person as the beneficiary, such as a spouse, a class of beneficiaries, such as children or grandchildren. You can also include future children or grandchildren as beneficiaries.

That person or persons will receive the death benefit when you die as long as the policy is still active. For instance, a term life insurance policy is only for a set time. If you outlive a term life policy, your beneficiaries don’t receive death benefits.

Generally, a policyowner can change the beneficiary at any time by notifying the life insurance company. However, a policy owner may designate a beneficiary as irrevocable, which makes it much harder to remove the person from the policy.

Key Takeaways

  • Life insurance policy owners can choose between revocable and irrevocable beneficiaries.
  • An irrevocable beneficiary can’t be removed from a life insurance policy without their permission. 
  • Irrevocable beneficiaries are guaranteed to receive their share of the death benefit.
  • An irrevocable beneficiary might be a good idea for minors, special needs beneficiaries and to guarantee a child gets part of the death benefit despite future family situations.

What is an irrevocable beneficiary?

An irrevocable beneficiary designation can’t be changed without the beneficiary's consent. In some states, the insurance company has to notify an irrevocable beneficiary if the policy has been canceled.

So, if you name someone an irrevocable beneficiary, that person will receive the death benefit -- even if you later would rather remove that person from your policy.

Children are often irrevocable beneficiaries. Making them irrevocable beneficiaries means they’re guaranteed to receive part of the death benefit and they can’t be removed either during your life or after your death without their permission.

How does an irrevocable beneficiary work?

Irrevocable beneficiaries are named on the life insurance application or in a change of beneficiary form.

Naming someone as an irrevocable beneficiary impacts your rights as the life insurance policyowner. Some life insurance companies warn that the irrevocable beneficiary's written consent is required for any policy changes. For example, if you wanted to take a policy loan or make changes to the premium, the irrevocable beneficiary has to sign the form.

Life insurance owned by a trust usually has the trust named as an irrevocable beneficiary as a way to make sure the death benefit stays out of the insured's estate.

Andrea B. Schanker, Esq., partner at Schanker and Hochberg P.C. says she uses an Irrevocable Trust to be the owner and beneficiary of life insurance policies most commonly to exclude the death benefit from the taxable estate at time of death (for "estate" tax purposes whether that be state and/or federal). It’s also known as Irrevocable Life Insurance Trust or "ILIT.”

Schanker adds that other reasons to name an ILIT is to protect and manage the assets on behalf of the named beneficiary or beneficiaries once the death benefit payout is released.

That’s especially vital for minors and “special needs” beneficiaries,” Schanker says.

“This is also important for those beneficiaries who may be adults but are not capable of managing the assets on their own for a variety of reasons (immaturity, drug/alcohol abuse, inexperience, etc.),” Schanker adds.

Irrevocable beneficiaries are guaranteed to receive their share of the proceeds. For example, a policyowner might want to name their children as irrevocable beneficiaries if they’re in a second marriage.

Benefits of an irrevocable beneficiary

There are a few reasons why you want an irrevocable beneficiary. Here are three:

  • Asset protection
  • Keep assets out of the estate when used with an ILIT
  • Guarantees beneficiary won't be changed

What is a revocable beneficiary?

The other option is a revocable beneficiary. Beneficiaries are revocable unless they are specifically named as irrevocable.

A revocable beneficiary can be changed or removed at any time by the policy owner without consent of the beneficiary.

The policy owner simply has to notify the insurance company in writing of the change.

Revocable vs. irrevocable beneficiary

Each state determines how revocable and irrevocable beneficiaries are treated. Some states consider irrevocable beneficiaries as co-owners.

Here’s how revocable and irrevocable beneficiaries compare:

Differentiation Points 

Revocable BeneficiaryIrrevocable Beneficiary
BeneficiariesCan be changed or removed at any timeCan't be removed without written consent of beneficiary
Policy transactions, changesDetermined by policy ownerMay require written consent of beneficiary
Policy cancellationAt discretion of ownerCompany may be required to notify beneficiary

Frequently Asked Questions

What happens if a beneficiary dies before you?

Beneficiaries can be a primary or contingent beneficiary. A primary beneficiary receives the proceeds if they’re alive. A secondary beneficiary receives the proceeds if the primary beneficiary has died.

How do beneficiaries share the proceeds from a life insurance policy?

If there’s more than one beneficiary, you can designate a different amount for each one. You can also decide how the proceeds are distributed if your primary beneficiary dies before you.

You can choose between:

  • A per stirpes designation, which means the children of a deceased primary beneficiary split the primary beneficiary's share. Per stirpes is the most common designation.
  • A per capita designation, which means the proceeds are divided equally among all beneficiaries. 

What happens to an irrevocable trust when the beneficiary dies?

Irrevocable trusts are governed by the provisions in the trust document. The trust will generally contain provisions for contingent beneficiaries.

Who can be the beneficiary of an irrevocable trust?

Beneficiaries are named by the provisions of the trust. Beneficiaries are usually family members or charitable organizations.

Why would a policyowner choose irrevocable beneficiaries?

Choosing an irrevocable beneficiary protects the person from being removed from the life insurance policy later. Instead, that person must agree to get removed from the policy.

Going this route gives your beneficiary more protection.

Is an irrevocable beneficiary a primary beneficiary?

Yes, an irrevocable beneficiary is a primary beneficiary.

When can an irrevocable beneficiary be changed?

Irrevocable beneficiaries can only be changed with their consent.

That’s different from revocable beneficiaries who can be changed or removed at any time.

How often should you review your beneficiaries?

Generally, you should review your life insurance once per year, or when a life change occurs, such as marriages, children, etc.

Lives change so make sure to review your life policy to make sure it offers your loved ones enough protection and that you include beneficiaries that you want.

How can I remove a beneficiary?

Revocable beneficiaries can be removed by notifying the insurance company in writing. Irrevocable beneficiaries can't be removed unless they agree.

This vital difference is a critical reason why it’s so important to decide whether to go with revocable or irrevocable beneficiaries.

What happens if a spouse is an irrevocable beneficiary and you get divorced?

If you name a spouse as an irrevocable beneficiary, the person remains the beneficiary unless you get his/her consent to get removed from the policy. That person stays on the policy even if you go through a divorce. That can make for a messy situation after you die.