Sarah, 35, wishes to ensure that her life insurance policy proceeds of $500,000 are distributed directly to her brother, Michael, without forming part of her estate. Which action should Sarah take?

Question: Sarah, 35, wishes to ensure that her life insurance policy proceeds of $500,000 are distributed directly to her brother, Michael, without forming part of her estate. Which action should Sarah take?

Answer options:

• Name her estate as the beneficiary in her will. ✅ Name Michael as the revocable beneficiary on the life insurance policy.
• Hold the life insurance policy jointly with Michael.
• Create an inter vivos trust and name it as the beneficiary.

Correct answer: Name Michael as the revocable beneficiary on the life insurance policy.

Explanation: Naming Michael as the beneficiary directly on the life insurance policy ensures that the proceeds bypass Sarah's estate and are paid directly to Michael, avoiding probate and potential creditor claims against the estate. 'Revocable' means she can change it later.