Life insurance policies let individuals leave funds to their loved ones when they pass away. That life insurance can help to cover a variety of costs left over after death.
Often, it is best to leave these funds to a beneficiary who is a spouse. However, it is also possible to name a child as the beneficiary. Doing so is often common in situations where the spouse is not present or not in control over the children.
If you wish to leave life insurance benefits to minor children, there are several steps you need to take.
Creating a Trust
One of the ways to leave funds behind through a life insurance policy for a minor is to create a trust. A trust is its own third party. It can hold a variety of types of investments and funds. But, it does so with overreaching requirements. For example, a trust can maintain the funds from a life insurance policy.
You will need to appoint someone to be the executor of the trust. This is an adult who will make financial decisions about how to spend the funds. But, there are restrictions on how to do this. Trusts allow you to create a great deal of protection and give you the freedom you need to customize a plan.
Appointing of a Guardian
If you do not create a trust, this may mean the court will need to appoint a guardian of the children to manage the funds. Life insurance companies cannot pay out the proceeds of a policy directly to a minor.
The guardian, on the other hand, will manage the funds for the child until they are over 18. If you do not appoint someone to do this for you, the court will ultimately make this decision for you. You usually appoint a guardian through a legal decree or a will.
It is best to select a life insurance policy that is right for your loved ones. Then, name an adult as the beneficiary if possible. If you want to leave funds to a minor child, create a trust or appoint a person to be a guardian. Work with your insurance provider to put in place a plan that works for you.
If you have questions about making a minor a beneficiary of your life insurance policy, contact us today by calling (405) 224-1000 or by using our online forms.