Never Make Minors a Beneficiary for Life Insurance Policies.

We have been meaning to educate everyone about this very important nuance with regards to minor children and life insurance policies. It's hard to explain and here's the best explanation we've read so far:

Suze Orman, the excellent, down to earth financial columnist from O, The Oprah Magazine has articulated this very clearly in the May 2007 issue:

"Never make an underage child the beneficiary of your life insurance policy. If you die, the insurer will force your relatives into court to get someone appointed as guardian of the estate (this is separate from any guardian you may have specified in your will to care for your children).

That's going to take time and money, and your heirs will still have a major headache: The court may demand that the funds be placed in a "blocked" account that requires approval for withdrawals. Everytime your children's guardian needs money, she'll have to go to court (that usually means hiring a lawyer and spending more cash) to request it.

Again, the solution is to make your trust the beneficiary. Insurers will happily transfer the money to the trust, and the distribution of assets will be handled exactly as you specified. That's going to be a serious benefit for your heirs."

She could not have said it any clearer. It is important to have a Living Trust and name the trust as the beneficiary for your life insurance policies. It's the easiest and most cost-effective way to protect your children in case Mom or Dad pass away.

Comments

[Life Insurance]

That's a really really good idea, and not one that the uninitiated like myself would think of. Thank you for bringing this to light.