The question, “who should be your designated beneficiary under your life insurance policy” is a very important family decision that should be made after careful consideration of all relevant family and financial goals in mind.
As an experienced estate planning attorney, I strongly suggest if you have a blended family, minor children, disabled children, spend thrift children/beneficiaries, a single parent, a manipulative ex-spouse or in-laws, or if you merely want to provide your family additional protection and benefits, it is imperative to meet with a qualified estate planning professional before signing a life insurance beneficiary designation form.
The following are a few of the issues to consider and discuss:
- Probate: If no beneficiary designation is listed or if the primary beneficiary listed under your life insurance policy has predeceased the insured and no contingent beneficiary is listed, the life insurance proceeds will flow through the decedent’s estate, and go through probate. This is avoidable.
- Minor Beneficiaries: : For a minor to receive insurance proceeds, a conservator for the minor will have to be appointed by the probate court to collect and manage the minor’s money until he or she turns 18 years of age.
- Conservatorship: : The conservator appointed over your minor’s assets will typically be the surviving biological parent. If that parent is an ex-spouse, you may not want to have your money go into his or her control. Additionally, a minor conservatorship will end when the minor turns 18 years of age. This means that an 18 year old will obtain the full benefit and control of the proceeds of your life insurance policy. Most 18 year olds are not financially mature enough to be able to make good decisions and properly manage a large amount of money in addition to properly dealing with the influences of friends and others surrounding them, who may know about the money they have just received.
- Family Living Trust: : A living trust is a wonderful vehicle to designate as your life insurance beneficiary. Under a living trust, the Trustmaker (person creating the trust) can designate what, when, and in what manner a child or any beneficiary should receive his or her inheritance, including life insurance benefits. A Trust can designate a successor Trustee to manage the trust and its assets based upon the instructions you leave behind, preventing a court conservatorship for a minor, undue influence or even an ex-spouse or others from having control over your money, whom you may not want to give control to. A trust is also private, which keeps the court out of your family affairs.
If you have any questions regarding family based estate planning, living trusts, probate administration, guardianships, conservatorships or any other legal issues, please call the experiences estate planning attorneys at Rowley Chapman & Barney, Ltd. (480) 833-1113.
Kenneth C. Barney is a partner and an Arizona Estate Planning Attorney, practicing in all the areas of the law shown above, since 1999.