Lets say you and your husband died and your life insurance pays 1 million..what happens to the children ?

Question

Do you ask a close relative to look after them and say here is 1 million dollars take care of them and trust that they will do the right thing, after all they are family right ? I heard that its not a good idea to put down minors as beneficieries or contingencies. What would you do....?

Answer 1

Now your Q can be answered differently based on what kind of insurance policy you have and what kind of options are included. What you Should do it this:
So yes you can leave the kids with a relative. If you don't want all your money to be blown away what you do is have it sey up to only pay out a certain amount every month. And then when they reach 18 lets say, you can have the insurance pay out more money for school.
Basically, what I'm saying is that you can dictate how that money is paid out.

Answer 2

NO. don't do that. Don't just trust that these people will do the right thing. What if they don't? then your children are screwed. Their future will be screwed. You SHOULD put your children as beneficiaries & contingences, make a will saying they will have power over that money at the age of 25 (mature enough age). If you die & your children are still minors, what usually happens is Social Services takes them & puts them into Foster homes if there is no "next of kin" to take care of them. Make sure you put your kids in good hands. Don't just trust & "hope they do the right thing". That's when your kids lives fall apart. You don't want that. So, be smart. Just b/c they are relatives, it doesn't always mean they are good people & do the right thing. Relatives stab you in the back too, they are capable of doing things a complete stranger would do.

Answer 3

Two Words.... "Irrevocable Trust" because you control what happends not someone else.

The main reason for setting up an irrevocable trust is for estate and tax considerations. The benefit of this type of trust for estate assets is that it removes all incidents of ownership, effectively removing the trust's assets from the grantor's taxable estate. The grantor is also relieved of the tax liability on the income generated by the assets. While the tax rules will vary between jurisdictions, in most cases, the grantor can't receive these benefits if he or she is the trustee of the trust.

Another concern... $1,000,000 sounds like a lot of money but will note, the term you used "Child(ren)" Keep in mind, paying off all your debt including house, cars etc then divide that number of years that your children will need financial support. Depending on your current lifestyle, you will want to match your current household income over the same period of time.

Example:

Household income - $100,000
Debt - $ 40,000
End of life cost- $ 15,000

Children- 5 & 6

Planning 13 years X 100,000 + $40000 debt + $15,000 end of life = $1.3 Million probably would be planning for 1.5 million.

Answer 4

Most of the time, it's put into a trust for the care and raising of the minor children, and legal guardians are chosen by the parents and put into writing in the will. The guardians (or someone else - like a lawyer or accountant) are named to manage the trust. If it's a large enough sum of money, there's sometimes a "committee" involved to make sure the money is used for the intended purposes.

Answer 5

I have a policy with the bank. In the event something happens to me the appointed guardian will receive X amount per month until he is 18 years old. Thereafter, he will begin receiving the payments and at the age of 23 (should be finished with college by then) he will have 100% access to all funds. During his college years it is very clear in my will that he will receive the monthly allowance directly and any additional monies necessary for college tuition and a statement is to be provided before any monies are released. If he decides not to go to college (and I will kill him from my grave) he still can't touch the monies in full until the age of 23. Be very distinct and clear. Personally, I have read too many horror stories of how the best of relatives and/or friends turn into monsters. Lest not forget money is the root to all evil.

Answer 6

What I recommend, is setting up a trust. You ALSO have to have a will and guardianship outlined for the kids.

What *I* did, was have one sibling and spouse as guardian of my minor children, and two MORE siblings as joint trustees over the money - NOT the one that has the kids.

I would NOT leave the money directly to the kids, because then whoever is guardian over them has control of the money.

Answer 7

People with children are smart to have a will drawn up by an attorney. In it, designate who you want to take over the raising of your kids, after consulting with them, of course. If minors are named as beneficiaries, special arrangements will have to be set up by an attorney to insure some guardian does not have access to the money.

Answer 8

You need a WILL. You can't ASK a relative to take care of them. The courts will decide who gets them.

You need a will!

You are correct, the insurance should not designate your children. If it does, it needs to do so as a managed trust.

Answer 9

You need a trust to handle it properly.

The trust becomes the owner and beneficiary of the policy.

The terms of the trust that you setup dictate how that money is to be use in event of death, how much to be spent on kids for education, wellbeing, etc..

You can name trustees to oversee that money is used according to your wishes.

Answer 10

You assign someone to receive the money until the kids turn 18, and they are also responsible for the even (or uneven) distribution of it.

They don't have to be family.