What type of beneficiary must be designated to ensure that proceeds do not go to the estate?

To ensure that life insurance proceeds do not go to the policyholder’s estate, it is essential to designate an irrevocable beneficiary. An irrevocable beneficiary cannot be changed or removed without the consent of that beneficiary. This designation provides a level of protection because it ensures that the beneficiary has a vested interest in the policy, which makes it less likely that the policyholder will change their intentions regarding the distribution of the proceeds. By doing this, the risk of the proceeds becoming part of the estate and having to go through probate is minimized, allowing them to be directly paid to the designated beneficiary upon the policyholder's death.

While a revocable beneficiary can be changed by the policyholder during their lifetime, this flexibility can inadvertently lead to situations where proceeds could end up in the estate, depending on how changes are made or if the policyholder passes away without a clear intention regarding the beneficiary. Contingent beneficiaries serve as secondary beneficiaries that would receive the proceeds only if the primary beneficiary predeceases the policyholder, but having just a contingent beneficiary does not prevent the estate from being the recipient in the absence of any primary beneficiary. Add-on beneficiary is not a standard term in insurance and does not apply in this context. Thus, naming an irrevocable beneficiary