COVID-19 – Buying Life Insurance to protect your children, but what happens when you name them as the beneficiaries?
During these uncertain times, people are attempting to prepare for the worst. This is especially true for those who have minor children. The fear of getting infected with the virus, developing a serious illness that could potentially lead to death, and leaving their children unprotected is very real. Thus, individuals are opting to buy life insurance to make sure their children are taken care of in the event of their death.
But what happens when you die and your minor children are the beneficiaries under your life insurance policy? Since minors cannot legally manage property, the court will appoint a guardian to handle the money for the benefit of your children until they reach the age of majority—a guardianship proceeding. Alternatively, life insurance companies will sometimes ask you to name a custodian, which will create a custodianship account under the Florida Uniform Transfers to Minors Act (“UTMA”), also until the age of majority.
Furthermore, if an “UTMA” account is not created when you purchase the insurance, an alternative to the guardianship proceeding would be to set up a trust. A trust allows you to pass the property to a person of your choosing—the trustee—to hold and manage it for the benefit of your children—the beneficiaries. This will create a legal relationship between the trustee and the beneficiaries, where the trustee becomes a fiduciary of the beneficiaries.
Contrary to popular belief, trusts are not just for the wealthy. Instead, they are an accessible option to people from all kinds of economic backgrounds. Setting up a trust will give you peace of mind because it will ensure that the money not only goes to your children, but that it is also managed effectively and for your intended purpose. Additionally, you can put in the trust any other assets you may want to leave your children along with the life insurance benefit.
Whether it be a guardianship proceeding or a trust, the lawyers at Chepenik Trushin LLP are here to assist you. We are experienced, ready, and willing to make sure your loved ones are protected amid the COVID-19 pandemic. Please contact Bart Chepenik at 305-613-3548, or Brad Trushin at 305-981-8889 to help you create an estate plan that suits your legal needs and states your wishes and desires. We are here to help you and your family members. Stay safe.