Have Life Insurance Policies?

One of the benefits of a Living Trust is when you have life insurance policies and minor children, which surprisingly many insurance agents do not realize themselves, is that you can control how life insurance policy proceeds will be paid out and managed.

You almost never want to name minor children to receive a life insurance policy death benefit directly. First, if they are still minors they cannot receive the death benefit unless a guardian of the estate (i.e., the money) is established according to the requirement of many policies. Second, if they receive the money and they are still a tender young age (i.e., 19, 20, 21, and so on) they could blow the money faster than you can blink.

If you name the beneficiary of your life insurance policies to be your Living Trust then it will avoid many issues if you were to pass away. Some of the issues you will avoid:

1. Avoid having the other parent petition the court for guardian of the estate to receive and manage the proceeds of the life insurance policy.

2. Avoid having your children receive the proceeds directly if they are already age 18 and you want it to be held in trust a while longer.

3. Avoid having to change the beneficiary on the policies when your wishes change or you have more kids. You can simply amend the trust rather than updating the beneficiary designations for each policy.

By naming the Living Trust as the beneficiary of your life insurance policies, you effectively control how the life insurance policy proceeds should be managed if you die before your kids are adults.