Rust & Anewalt Law Offices

One of many reasons your life insurance agent and attorney need to talk with one another One of the classic mistakes made in designating a beneficiary of a life insurance contract is in the designation of the contingent beneficiary or beneficiaries who are minors. This typically happens when an individual names his or her spouse the primary beneficiary and then names his or her minor child or children the contingent beneficiary or beneficiaries. So what is wrong with doing ...this? Well, here is the problem. If the primary beneficiary is no longer living, the contingent beneficiary child or children will probably not receive the proceeds of the life insurance policy immediately because: More than likely, the applicable law where you live will require that a guardian be appointed to administer the death benefit proceeds for the minor child or children. If a guardian is not in place, someone (e.g. a grandparent or uncle or aunt) will have to invest time and money to have a guardian appointed by the court. If this step has to be taken, the court appointed guardian will control the money for the minor’s benefit until he or she reaches the age of majority, depending on state law. The problem is exasperated if one of the minor children is a special needs child or adult in that the death benefit may put the special needs child’s government support at risk, thereby in disrupting, if not eliminating, important care and support programs that the child depends upon for his or her daily and future care. This mistake can be avoided by making sure your attorney and insurance agent are in communication with one another regarding the contingent beneficiary designation. The solution may be set up a trust for the minor children, one that comes into being upon the death of the second to die as between the parents, or a living trust (one that is set up immediately). In the alternative, the parents my set up a UTMA (Uniform Transfer to Minors Act) custodial account, naming a custodian to handle the proceeds from the life insurance policy. It should be noted that this mistake can be made with any financial contract (e.g. 401(k) plan, IRA). If you are interested in learning more about this subject, please contact Rust & Anewalt Law Offices L.L.C. care of 610 821 0484 to set up a no-cost consultation session. Knowledge is one thing, acting on it is quite another (Anonymous)