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Irrevocable Beneficiaries Have a Vested Interest in Life Insurance Benefits

UPDATED: February 20, 2013

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If an insured designates a specific person as the irrevocable beneficiary of a life insurance policy, does the designee acquire a vested interest in the policy?

Yes, an irrevocable beneficiary of a life insurance policy has a vested interested in the proceeds payable by the policy. A vested interest provides an irrevocable beneficiary with immediate rights – that means the policy holder cannot take certain actions without the permission of the irrevocable beneficiary. For example, a policy holder cannot change beneficiaries without the irrevocable beneficiary’s consent. A policy holder also cannot terminate the policy without consent. Naming someone as an irrevocable beneficiary to your life insurance policy may be useful if you want to share some control over the policy with another person.

If you would prefer to have sole decision-making power over the policy, you may want to designate your beneficiaries as revocable beneficiaries. You do not need a revocable beneficiary's consent to make changes to your policy. Unfortunately, when your life insurance benefits are paid, you will not be around, so be sure to choose beneficiaries carefully in order to avoid issues or a misinterpretation of your wishes down the road.

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