Palm Beach parents do what they can to protect and provide for their children. For those who want to make sure they continue to do so in the event of their death, they may decide to take out a life insurance policy that benefits the children. The way that the beneficiary designation for a policy is done has a profound effect on estate administration if the children are minors when the policyholder passes away.
Some people make the mistake of listing their child as the beneficiary of a life insurance policy. While this may make a Palm Beach parent feel good, it could cause significant issues if the parent passes away while the child is still a minor. This is because minors cannot directly inherit property, which means that arrangements will need to be made to hold the proceeds from the life insurance policy for the child.
The other parent or another trusted adult will have to petition the court to become the guardian of the money on behalf of the child. This adds to the complexity and expense of probate and the administration of the estate. If the policyholder’s estate plan does not designate someone, the court will do it, and that may not be ideal.
Instead, the parent can make sure that the proceeds of the policy go into a trust that names the child as a beneficiary. One or more trusted individuals can be appointed as trustees. Doing so allows the parent to retain some control over how the money will benefit the child and will not add another layer of complexity to the estate administration process during a time when family members are grieving.