I've recently obtained a new job which includes a life insurance policy as part of my standard benefit package. I have the opportunity to name up to three beneficiaries and assign a percentage of the policy to each.

I have three people in mind to add to the policy, my mother, my father (whom are divorced on bad terms) and my partner of 2 years (to whom I am not married - we co-habit-ate). I should also mention that I currently reside in Canada (on a work permit) even though I am a US citizen.

I have approximately $25k in student loans (one private loan through Citibank and one government loan) both of which my father cosigned for, $3k in a car loan, and I'm currently cosigned in an apartment lease with my partner for 1 year - totaling approximately 14K per year. I have very little to no credit card debt and no shared debt with my partner with the exception of the apartment lease.

So my dilemma is how to assign a percentage of my life insurance policy to my loved ones if I were to unexpectedly die. Do I give 33% to each my mother father and partner?

What about my debits? Who inherits what debt? If my father cosigned my student loans should I assign him a larger percentage (under the assumption that he would become responsible for my student loan debt if I died?).

Who is responsible for my funeral? Presumably one of my parents since I'm not married to my partner? What about my car loan which neither of my parents cosigned for? If I were to die my partner would be presumably distraught and providing him with some money to cover rent would also be nice.

The total policy pay out would be close to $100,000 - at least as far as I understand (its x2 my salary). But I'm also not certain if that amount is taxed? Also is it possible that any of my debts would be paid by the policy FIRST before any money was given to my beneficiaries?

If anyone has any experience or advise on how this all works and how best to allocate it would be greatly welcomed. Alternatively if anyone knows of a professional advising service that I could use to help me figure it all out that would be great too. Although keep in mind it needs to be relatively inexpensive.

Thanks!
Brad

Give it all to your dad.....

First - thanks for the advice. I appreciate the help.

I've contact my student loan providers (Citibank for the private loan and Direct Loans for my government student loan) to see if they can confirm how my loan debt is handled in the event of my death. I.E. if they are discharged or fall back on the cosigner to repay. Hopefully they can point me to documentation or answer how that works. If not then I'll see about contacting a lawyer.

Also the information about the apartment lease makes sense. And my car I don't really have a desire to pass on - more of a concern about making it someone else's financial responsibility.

As for my funeral - I'm curious why do you suggest not to prepay for a burial plot/service. Is it just that its substantially more costly than having a lawyer or parents handle?

@InsuranceExpert:

I'm concerned about my debtors chasing down my loved ones for money I owe in the event of my death. I want to make sure that the loved ones that have the most liability for repaying my debts get the a larger percentage of the life insurance money.

As L0stman seems to point out it seems like many of my concerns may not be valid - it sounds like in many cases in the event of my death my debts are discharged? I'd admit complete ignorance on how that works. I'm relatively young and I've thankfully never been placed in the position of knowing what happens to a persons debt when they die. I assumed most if not all of it would pass to their next of kin - whomever that would be.

Thus my reason for posting - to solicit knowledge from those more experienced than myself. I'm trying to make an informed decision about allocating my money to loved ones vs just allocating at random or divvying everything up equally. Keep in mind that in the event of my death my parents are NOT on good terms and will likely not cooperate with one another.

So if I give all my money to my Mom, and my Dad ends up with all my bills.... well doesn't it suck to be him. Likewise if I give all my money to my spouse but my parents get nothing and they have to pay to bury me - again sucks to be them. So I'm just trying to understand how debts are handled in the event of death and make sure I am being fair/reasonable to all my loved ones.