Life insurance beneficiary...

[adventure_woman]

We have a will on what happens to our DDs in case something happens to both of us. Who should be listed as the 2nd beneficiary on our life insurance if something happened to both of us? I don't THINK we can list our DDs as they are minor children right? (I read/heard that whoever is listed as the beneficiary on the policy is who gets the $$...not who is on the will). Basically - I want the $$ to go to the person taking care of our DDs (for our DDs).

(I know we can call a lawyer to ask...but I figured I'd ask here first )

 

[Swimalie]

Who do you have listed in your will as their guardian if something happens to you and your husband? I would name them.

 

[Thumper_Man]

You can name your children as 2nd, but it's probably not a wise thing to do so. Especially with the ages of your children at the moment. Courts can dictate when they would get the money. Usually wouldn't be until the age of 18 in most courts. Best thing to do is to contact your insurance company and establish what's called a Trust. You designate the trustee and you dictate how the trustee should use the money to take care of your children. You're children's guardian could be your trustee. The risk about just listing their guardian as a 2nd beneficiary (without a trust) is that legally, the 2nd gets all the money; and can do with it as they wish. Can you trust this guardian to give your children the money when they get older?

If you decide to list their guardian as a 2nd, then list your children as well. You can designate a percentage that will be given to each person. Maybe 20% to their guardian to help cover expenses for them as they grow up and are old enough to get their shares. Divide the remaining equally among your children.

 

[girli565]

Our financial advisor also recommended a Trust (when we have kids, don't have any now but we plan for everything). It designates the guardian you choose but the money can only be used in ways you have dictated for your children. Just listing the guardian as your beneficiary leaves you open to the guardian possibly just taking the money and running. Hopefully you trust that person enough so that won't happen but a Trust can be more helpful in this case.

 

[RitaE]

Do not give the money to a relative expecting it to be used for the benefit of the children. I can name three cases now where the supposedly trustworthy relative has taken the money and used it for new cars, shopping, vacations for him/herself and when it came time for the college bills to be paid it was gone.
I know that we should all be able to say "I'm trusting them with my kids I should be able to trust them with the money" but it is what it is.

Our estates are set up so that the named guardians of minor children receive an amount to "compensate" them for their added duties. This includes consideration that the guardian (my sister) would likely have to get a bigger house etc.

The bulk of the estate including life insurance goes into trust instruments which dictate that the funds have to be used for the care and education of the children. The guardian of the children is different than the Trustee of the money. The minor children (I only have one left under 18) receive the balance of their trusts at age 21.

 

[Sadie22]

Consult an attorney so that everything can happen the way you would want it to happen. You want the money to go to your children but to be held in trust for them by an adult. No insurance company would pay a large sum of money to a minor, but if you just put the name of some other person as beneficiary, then that money is subject to their bankruptcy, their divorce, or what-have-you. I can remember at one time having a policy payable to the eldest in trust for the youngest who was still a minor, as well as accounts being payable to [names of my children] per stirpes.

An attorney can lay out scenarios you had not considered, as part of an overall estate plan. Estate plans are not just for billionaires.

 

[CarlisleMom]

Talk to the person who wrote your policy. I think Dh and I have DD10 listed as 2nd but since she is a minor had to have an adult listed to make decisions for her.

 

[ZachnElli]

My husband writes and sells these policies and he'd tell you to contact an attorney and set up a trust. He has several attorneys he works with and it is what we have done. You need to put your property in the trust too; home, cars, etc.

 

[adventure_woman]

I had DH pull out our will and it does state that a family trust be created if we both die (or however the legal term is). So I think for the 2nd beneficiary he will list Family trust as stated in our last will and testament.

 

[lost*in*cyberspace]

Absolutely do NOT list a minor as the beneficiary of a life insurance policy. OP, you are correct that it doesn't matter what the will says, it matters what your life insurance policy says as to who will be the beneficiary.

It would be worth every penny spent to consult with an attorney regarding these issues to make sure this is done correctly. You cannot believe the problems it can cause not to get this right; I am posting from a very painful personal experience.

 

[Praying Colonel]

This is NOT legal advice.

Consider talking to an estate planning attorney about executing a will which contains a testamentary trust. This is a trust which comes into being upon the death of the testator.

The testator can designate someone as a trustee to manage the trust assets until the child reaches an age at which you would feel comfortable with the child having the trust assets free and clear (e.g., age 21). However, the trust language can permit the trustee to access the trust assets for "MESH": Maintenance, Education, Support or Health.

After such a will is executed, the testator can then get with their life insurance carrier to make the trustee and/or trust the alternate beneficiary.

Again, consult with an estate planning attorney if this is something you want to consider.

 

[amcnj]

Another thing I ahve read over the years is to consider naming a guardian for any minors, as well as someone else to handle the funds. If I recall it was a "checks and balances" type of thing. Is this still recommended anymore?

 

[dhardawa]

Spend the money and get a living trust. Then, the trust becomes the primary beneficiary. Without the trust, the money will be handed to the kids they day they turn 18 (assuming you list them on the policy). If you have it given to a guardian, you have no way to know how the money will be spent. My trust is very, very detailed about how money can be spent and when.

 

[Sadie22]

Another thing I ahve read over the years is to consider naming a guardian for any minors, as well as someone else to handle the funds. If I recall it was a "checks and balances" type of thing. Is this still recommended anymore?

Consulting with an attorney regarding these issues is the best thing you can do. In some cases you want two separate people, in others not, and that would be up to you. It is important to choose wisely and to think through all the scenarios which a good attorney could lay out for you.

 

[bettymae1121]

Right now our infant daughter is listed as 2nd, only until we get some time to find an estate planning attorny so we can set up a trust. I plan to do that in the next few months. Prior to LO being born my father and DH's mother we're listed as 2nd and we didn't want to leave it as it was, but didn't have time to see a lawyer either. The odds of something happening in the next few months is slim so it's a chance we're willing to take. We really need to find the time (and money) though!

 

[jt'smom]

we are in a situation where my mother left a $200,000 life insurance policy to her four grandchildren, split evenly, with no guardians or trust clause. when she died a year and a half ago, my son and my nephew were under 18 by a few years and it has been such a pain. the 2 older grandkids over 18 filed and were able to get their money, but the 50 grand shares of my son and nephew have become what the insurance company terms a "supplemental policy" since you can't give out money to a minor. it's no big deal in that my brother and i have to make sure the insurance company has our current address on file, but the money earns a little interest and taxes have to be paid on it each year. when my son turns 18 in a couple of years, he will just file the paperwork then and be sent the money, with interest. although, what my mother was thinking i can't imagine... try to picture an 18 year old being given a check for 50 grand plus, that's totally in their name!!!

 

[dzorn]

We have a will on what happens to our DDs in case something happens to both of us. Who should be listed as the 2nd beneficiary on our life insurance if something happened to both of us? I don't THINK we can list our DDs as they are minor children right? (I read/heard that whoever is listed as the beneficiary on the policy is who gets the $$...not who is on the will). Basically - I want the $$ to go to the person taking care of our DDs (for our DDs).

(I know we can call a lawyer to ask...but I figured I'd ask here first )

The first should be your spouse the second should be the trust you have set up for your children.

Denise in MI

 

[ilovemk76]

we are in a situation where my mother left a $200,000 life insurance policy to her four grandchildren, split evenly, with no guardians or trust clause. when she died a year and a half ago, my son and my nephew were under 18 by a few years and it has been such a pain. the 2 older grandkids over 18 filed and were able to get their money, but the 50 grand shares of my son and nephew have become what the insurance company terms a "supplemental policy" since you can't give out money to a minor. it's no big deal in that my brother and i have to make sure the insurance company has our current address on file, but the money earns a little interest and taxes have to be paid on it each year. when my son turns 18 in a couple of years, he will just file the paperwork then and be sent the money, with interest. although, what my mother was thinking i can't imagine... try to picture an 18 year old being given a check for 50 grand plus, that's totally in their name!!!

College.

Our trust is set up that the child gets 25% on their 18th birthday, college and car money, 25% on their 25th birthday, marriage and new life money, and the remainder on their 30th birthday, house and marriage money.

 

[powelweb]

Another thing I ahve read over the years is to consider naming a guardian for any minors, as well as someone else to handle the funds. If I recall it was a "checks and balances" type of thing. Is this still recommended anymore?

We've followed this concept by having our life insurance name each other as primary, and my living trust as contingent beneficiary. The living trust provides our dear friend as guardian for our DD with my mother in law as trustee. We live on the east coast with inlaws in New Mexico, so this ensures DD stays in a comfortable, familiar environment (dear friend has provided day care since DD was 4 months old- she's now almost 9 yrs and sees her daily after school now while we both work), but with continued oversight and contact from her grandparents to ensure DD's overall wellbeing in our absence.

Dear friend was my maid of honor at our wedding nearly 13 years ago, so all parties have met in person, and all parties have copies of the living trust now to understand our wishes. At the highest level, we've even discussed this with DD so she understands that while we want and plan to be around for a very long time, if something unforeseen does happen, she will live with this dear friend and her family (she has two older boys).

We've carved out 20% of the Trust to be used specifically for education, too, with any remaining balances available to DD on either her 25th or 30th birthday- I'd have to pull the doc to confirm.

FWIW, we've also provided in the Trust for the unlikely event that something happens to all 3 of us at once, which has effectively DH's portion of the trust split between his parents and siblings outright while my portion of the trust will be held in trust for my siblings since my parents are deceased and my sibs are not good with money. just something to think about....

 

[brymolmom]

We are struggling with this type of decision right now. We already have a Will - and have had it since the kids were born. But DH is executor on his late sister's estate and it has been HORRIBLE because she had nothing in writing the way she actually wanted it. So it's made us rethink our decisions from the first time around.

I hear all of you (and my dh who would prefer it this way) about setting up a trust. My MAJOR concerns about this are:
1) What if my sister (who will take my kids) comes up with something unexepcted and needs additional $$ from 'my' money? Not sure what it would be here but maybe something happens to the economy and they need extra $$ just for the basics.
2) If DH and I pass - my sis and her dh will have 5 kids between the ages of 7 and 11...Is it cumbersome to get 'approval' to get $$ from a trust? Honestly, if she has to fill out forms, get approvals and wait a couple weeks for the cash - that is NOT something I want to add to her burden - I'd rather have her be able to put it into a savings account to grab it if needed.
3) And this one's the big one - IF we decide to give the balance of a trust to our kids at age 21 or 25 - Is there a way for my sister to fight that if it became necessary? Now, I'm very confident that my kids will end up 'responsible' but I have no idea that they will be at age 21 or even 25. What if dd ends up living with some deadbeat loser at the age of 25 who won't get a job and just sucks money out of her? Even responsible girls have been known to fall victim to this type of loser at some point in their youth...I have no desire for her to inherit a couple hundred thousand dollars right then if this is the case. I have a brother who is a drug addict - started around the age of 18. I try my best every day to make sure this won't happen to my own kids - but WHO KNOWS?? Especially with the emotional burden of losing your parents. What if one of my kids is off the right track at 21 or 25? Again, no way I want them to get hundreds of thousands of dollars at this point if it's the case. My SIS would be able to assess this situation (and I think there is a much better chance she stays stable and responsible since she's an adult and has been for 45 years than my kids being 100% responsible enough at such a young age) - and either give my kids their money at an appropriate time (before buying a house....when going to grad school...or just when they're settled and ready to start the rest of their lives) OR save that money to use for them for something to help them out of their situation (for counseling....for some sort of training to find a job....for doctor's care). I just can't stand the thought of deciding right now exactly when my kids will be responsible enough to get that large chunk of money. I feel much more comfortable putting that into the hands of my sister who can determine at that time how my kids are doing and respond accordingly.

Thoughts on any of this? Dh and I are currently 'arguing' about it. I can't come up with a good way around my concerns.