Obtaining adequate life insurance is one of the most important things you can do to protect your children.
June 10, 2015 - Posted by: admin - In category:
This is the second in a serious of posts geared towards estate planning considerations for parents of young children. We previously noted that one of the first steps that should be undertaken by EVERYparent who has young children is to retain an attorney to draft a simple Will through which such parent can designate who would serve as guardian for their children in time of need. You should then ensure that you have adequate life insurance coverage for you and/or your spouse. How much life insurance do you need? Please consult with your insurance agent to answer this question. But then, once you have such life insurance in place, please remember that having life insurance, by itself, is NOT enough!!! Rather, you then must ensure that you have named appropriate beneficiaries for such life insurance and in the case of minor children, naming such minor children as beneficiaries is almost always the wrong choice. Why? Great question. Thanks for asking.
A life insurance company will NOT pay life insurance proceeds to a minor child. Therefore, in the instance where parents have died and have named their minor child as beneficiary of such life insurance, the insurance company will simply retain such life insurance proceeds until there is a court-appointed guardian in place to whom such life insurance proceeds can then be paid. This process of getting a court appointed guardian can be a time consuming and expensive process, all the while, the life insurance company continues to retain the money and wait. It is amazing to me how very many parents of young children are not aware of these realities and instead wrongly assume that their “estate plan” is done since they have a life insurance policy (with nothing else in place). Again, while it is very important to obtain adequate life insurance, just having life insurance is NOT enough! More steps are needed to ensure that minor children will be protected and supported.