I started a job a few weeks ago and am trying to get all of the benefit paperwork filled out. The bank provides life insurance coverage(you can also purchase extra) and I am unsure who to name as beneficiary.
Of course I want the kids to benefit but since 2 of them are still minors and the other just turned 19 it probably wouldn’t be prudent to name them as beneficiaries. The only person I can think of is my parents. I know they are trustworthy, but are getting older and I’m also not sure if they would know how to handle everything. I know some people set up trusts but I’m sure that isn’t cheap and we barely scrape by as it is.
You can name your kids beneficiaries and name a trustee in your will to handle the money until they reach majority age. My husband and I purchased life insurance when our daughter was a newborn and named her as secondary beneficiary (i.e. if we both died.)
I am just going to put my parents for now, but need to continue to think on these things. Currently I do not have a will or anything in place. Starting September 1st, I will have insurance for the first time in 6 or 7 years. I am looking at having to replace my vehicle in the near future and also getting the mortgage on the house put into my name in the next year. It is taking longer than expected to put my life back in order, but at least I am making some progress.
Some states do not allow minors to be listed as the outright beneficiary. I did it anyway, but knew that it could cause the proceeds to go to my estate (and I didn’t want them to have to probate my totally minuscule ‘estate’). Well I showed them and lived until my kids were 18.
When my father died recently, the one financially responsible thing he did was list my mother as beneficiary on his life insurance. The claims were paid directly to her, and God bless Mutual of Omaha, they were the easiest company to work with and she had the first check within a week. If it would have gone to an estate, it would have taken us forever to get it and we had no need to probate an estate as he owned no real estate or titled items (car).
You also may wish to list your son or your parents as ‘Pay on Death’ on your bank accounts. It just makes it easier to get the money out quickly.
As a new widow, I came into contact with a lot of people whose spouse had left the life insurance or the house to their parents or an ex-girlfriend or… The surviving spouse and/or children got nothing. Don’t depend on others to “do the right thing” after you’ve died.
First thing - get yourself a will! It doesn’t have to be complicated, but you need to name the guardians for your children, assuming the other parent is not in the picture. And even if they are, they may predecease you. In that will, you can name the guardian as trustee for your children’s funds.
Also, check with your HR department. You can often name the beneficiary “X as trustee for Y”.
Name your spouse if you have one, and name your children as secondary beneficiaries. That means they will get the proceeds of the life insurance if your spouse predeceases you or if you die together (like in an accident). If you have no spouse, name your children. Whoever you name in your will as the children’s guardian can be the trustee of the funds. DO NOT name anyone who you do not want to be the ultimate beneficiary of the funds. No matter how much you think you can trust someone, you cannot name a friend or a sibling or your parents and then just expect them to hold the money for your children. Your children will always remember that you did not leave the funds to them.
Also possible. Check with your new HR dept. Our disability insurance company offers free life planning tools/guidance. It’s not something they readily tell you at open houses. They mentioned it once at ours a long time ago - right after we paid $$$ to have our wills done. I’d still go to a lawyer for something complicated. But if $$$ is an issue, perhaps something to check into. We need to redo ours because our Ss are now adults and don’t need guardians. Older S will be the executor instead of my MIL with Alzheimer’s.
@Chevda Bravo for pointing out the most important point and one that as many as 70% never get around to do…get a will…like yesterday. Most people assume things will work out but they haven’t the experience or seen things that would make you cringe. A will removes that for the custody of your kids. Can’t think of anything more important.
Life companies and your state generally won’t let you leave insurance proceeds “outright” to minors. They can still be the benes and there will be no issues once they’re 18 (21 in some states I guess). A trustee can be assigned to manage and distribute funds should you pass prior to them reaching the age of majority.
If your wishes and intentions are to leave the kids the money, I would never set your parents as beneficiaries. A beneficiary is a legal contract. Regardless of what anyone wants, thinks, etc. the beneficiary will get the proceeds and has zero obligation to use them according to your wishes. At that point it’s just money for them to do as they please. We all think M&D will do what’s right (and they most likely will the vast majority of the time), but what if something happens and they need the money for nursing home or they decide they want to control your kids actions and hold the money over their heads.
I know this all sounds crazy. I’ve been in the life insurance business for 30+ years and have seen sooo many scenarios that “would never happen”. They actually happen a lot, especially with today’s blended families. The easy way to avoid any of that is to eliminate by setting your kids up as beneficiaries or setting up a trust as the beneficiary and your kids are beneficiaries of the trust.
But please, go get a will. it won’t have anything to do with the insurance proceeds but it could decide who raises your kids. Seriously!
I would definitely list the children as beneficiaries.
I would also make a will ASAP.
A word about who controls the money while your children are minors or get to be a specific age. Be aware that even a family member or close friend you now trust can act very, very, differently once money is involved. And you might not have the full picture of what is going on with that person. If you need to have a financial guardian please consider a neutral party (i.e. a bank can act as a trustee). It is an absolute nightmare when a close family member who was trusted by the deceased turns out to be dishonest. I am living this now. In addition to considerable amounts of time and money spent on legal fees, the family will end up fractured. It’s a horrible betrayal. I know.
I believe @HeartofDixie has an ex-husband so he would be the guardian of the minor children. She may not want him to be the beneficiary of the money, but may not have a say in the guardianship of the minors.
Let’s hope she lives until they reach majority, which is 19 in Alabama.
Name your 19 year old child as a beneficiary if the insurance company will permit you to select an annuity–rather than a lump sum–payout. Ask the insurance company representative / agent if you can require that any death benefit be paid out as an annuity over a period of 5 years. (I believe that 5 years is the minimum for an annuitized payout. Longer options exist, but any longer period of time may not be worthwhile if the amount of death benefit is too small to be spread out over a ten year period.)