When you have children, you’ll go to the ends of the earth to protect them and make sure they are safe and happy. It’s a major reason why parents buy life insurance — or the main one at least. Having life insurance means that if something happened to you, your children would be OK financially.
But, there might be something you don’t know… did you name the correct beneficiary on that policy?
It’s important, to make sure that you have named the correct beneficiary to your life insurance policy because that beneficiary will receive the proceeds of your life insurance policy if you were to die. If you are married, most often you’ve named your spouse and that spouse or partner will receive the money upon your death.
What do you do if you are a single parent? If your minor child has been named as the beneficiary of your life insurance policy who receives the proceeds?
Minor children cannot directly receive the proceeds of a life insurance policy. Instead, the proceeds will be paid directly to the legal custodian of your child assuming that the legal custodian will manage the proceeds in good faith on your child’s behalf.
I recently received a call from a concerned family member. His cousin “Nancy” had unexpectedly passed away. “Nancy” was recently divorced and left behind a 10-year-old son. Nancy did not have a large estate but had one life insurance policy through her employer where she designated her son as the beneficiary.
Unfortunately for “Nancy”, she died without a Will with legal instructions on who or how her money would be managed for her son. As a result, the proceeds of her insurance policy was paid directly to her former spouse with no strings attached. Her former spouse was free to spend the proceeds as he wished and there was nothing Nancy’s family could do to stop this.
Making sure your children are ok – means thinking about the future now.
You can prepare a Will with provisions that sets forth your exact wishes. Your Will should spell out the person you choose as the trustee and how you’d like the money to be managed and spent. While it may seem like a big job to get this step right, keep in mind that not doing so could have repercussions for your children for many years to come.
If you have a life insurance policy and name a child as the beneficiary, but you do not have a Will, I would love to help you get that in place – to give you peace of mind knowing that your children will be ok when that time comes. Please reach out, by getting started here.