Life insurance beneficiary when you don't trust DH

amother

Slategray

Tue, Sep 20 2016, 12:59 am

Who do you make beneficiary of your life insurance policy if you have young children and don't want it to be your DH?

DH is an addict and for various reasons (related to that) I think (and he agrees) that it would not be wise for him to be "in charge of" the large, lump sum of $ that would be available in the event of my early demise.

I would want him to have access to it though for himself and the kids.

My first choice is my father who I would trust completely and who has a financial background. However, he is close to 80 years old, I'm not sure how smart that is.

Any other ideas? Also, does the person have to be told in advance (almost no one knows about the addiction)?

My insurance agent (who doesn't know exactly what the situation is, just that I want someone other than DH to be beneficiary for my kids) suggests setting up a trust etc but that costs $ (that I absolutely don't have) and is not an option.

TIA

Carmen Luna

Tue, Sep 20 2016, 1:23 am

Putting any other name other than your DH can be disastrous because all you need is your sister/brother/brother in law etc ending up with a lump sum of cash. And writing only your kids names isn't a smart option either. I would recommend you write a will stating exactly how to money needs to be distributed upon your.....
But I second you putting it in a trust because thats the only way your guaranteed its safe. I cant judge because I really don't know your financial state but a trust costs $400 to create. Totally worth it. You can even write inside that the money should only be distributed upon a significant milestone (18 years old/ marriage / 1st child/ to buy a house)

Amarante

Tue, Sep 20 2016, 8:17 am

Setting up a legal trust with a designated beneficiary is relatively inexpensive. You then can use it to designate all assets.

I am not sure whether simply stating for "the benefit of" is legally sufficient to create the legal relationship of a Trustee. With a trustee, the law already has laid out the parameters the trustee operates under. You can also designate when and how the corpus of the trust is handled - I.e. when do the beneficiaries receive the trust if there is enough left over after they are adults.

However, if you have ANY qualms about money and welfare of children, please set up a very explicit legal document outlining exactly what should happen.

amother

Slategray

Thu, Sep 22 2016, 10:46 am

Carmen Luna wrote:

That's assuming my sister/brother/brother in law etc are the type who would steal money from my kids, I'm confident that is not the case.

I don't know that I want the $ to be distributed only on a significant milestone. I would want my DH to have some access so he could hire someone to help out if necessary on a day to day basis and/or whatever else he would need (he makes a nice salary, but still). I think I would be okay with the decisions he made on how to use the money, just don't think it would be a good idea for him to have sole access to a large sum of money sitting in his account.

I reallllllly don't want to set up a trust, is that my only option? And if do that, who would I make trustee? And would I have to let them know in advance what the story is?

Amarante

Thu, Sep 22 2016, 1:21 pm

amother wrote:

A trust generally allows money to be spent for the beneficiaries of the trust in accordance with guidelines. So the trust can be used to pay for expenses or education. The trustee generally has discretion as long as the money is being spent for the benefit of the beneficiary.

The payout comes only if there is money left after the children reach a certain age.

It's always better to have legal documents prepared because that way everyone understands exactly what is expected. If there are no issues, that's great and the trust operates seamlessly.

amother

Lilac

Thu, Sep 22 2016, 2:13 pm

amother wrote:

That's assuming my sister/brother/brother in law etc are the type who would steal money from my kids, I'm confident that is not the case.

That has NOTHING to do with it.

I love my mother dearly but she has zero concept of money. handing her 2 million dollars to take care of my children is the absolutely worst idea in the world.

she would try to spend it on them and then her life would get in the way and she would spend it on them and a million other things going on and then there would be nothing left for their weddings, college, down payment etc.

Its not my job to provide for my mothers rent, my brothers tutoring, my sisters wedding in the event that I die. It is my job to make sure that the people who take my children in have enough money to take care of them.

Therefore even though my family have the BEST of intentions, I set up a trust. All money is deposited there and my lawyer(and his firm) and my mother are co trustees for everything.

that ensures the lawyer cant pull a penny and my mother can only pull for the sake of the children. It really is your best bet.

If I were you, I would set up a trust and have your dad or a sibling be cotrustees with your husband.

mha3484

Thu, Sep 22 2016, 2:28 pm

There are also tax benefits to creating a trust for your life insurance payout. I would speak to a competent attorney or accountant. My grandparents actually had their mechtuanim act as the executor of their estates which I thought was very smart. It cut out a lot of family drama and politics having a non relative distribute the assets.

amother

Ecru

Tue, Dec 13 2016, 10:15 pm

amother wrote:

bumping this thread cuz I was just reading it and was wondering if just writing things on your life insurance policy is valid. A legal will is not necessary when there a specifications on how to divide the life insurance policy?

Two separate things.

Your will states who should receive all assets you own that would be included in your estate. Might include any property you own, financial accounts under your name, etc.

Life insurance proceeds (at least in NY) do not pass through an estate. The proceeds are paid out to the designated beneficiary, whether an individual or a trustee of a trust.

Amarante

Tue, Dec 13 2016, 10:17 pm

amother wrote:

Naming the beneficiary isn't the problem as an insurance policy always has a named beneficiary or beneficiaries.

The issue is if you don't want a person to have the money for whatever reason. In that case you would need to have the proceeds of insurance go to a trust as discussed above.

If you have no problems naming your spouse as it's nit an issue.

However KH, you always have to assume that you might die together and then how would you want the money handled for your children.

cnc

Tue, Dec 13 2016, 10:20 pm

amother wrote:

Sometimes there are other things that need to be distributed besides for the life insurance policy.