Your Minor Children - Life Insurance Beneficiary
Are your children or child named as a beneficiary of a life insurance policy, retirement account or other financial investment account? Even listing them as secondary could be dangerous. Whenever I discover this with my clients the thinking is always the same, “oh, I’ll die way after they turn 18, its ok for now”. Sadly this isn’t always the case and you could be setting up your family for further heartbreak. When you complete estate planning you are protecting your family for things you never saw coming. The added benefit being that you also now have a plan for the things you can see coming.
Lets take a look at the hurdles a minor is left with to receive any kind of inheritance or benefit from a beneficiary named account. First, life insurance and retirement accounts such as IRA’s or 401K’s prohibit the distribution of the money directly to any minor. Even a legal guardian of the child can not easily facilitate the distribution.
Options are limited, time consuming and/or expensive. Creating an UTMA account can create a means for depositing these funds however, they are cumbersome to use and provide limited access to the funds during the child’s minority. Additionally they provide limited possibility of investment from the account and only afford a nominal interest rate. Filing a conservatorship over the child requires court fees, waiting periods and typically attorney fees as well.
Creating simple solutions in estate planning can avoid all of these issues. For more information head over to our website or schedula a free consultation with Nick Klimas.