Beneficiary Designation & One Thing That Could Happen...

Let's use, for example, a real life situation. A single mother, successful executive, and good wage earner, passed. Unfortunately, her estate planning was not in great shape. The client was intelligent and loved her child tremendously. She did have adequate life insurance in place, that covered her debt, final expenses, and provided for the child generously. 

The ex-spouse was still living, and they did have a good relationship. Normally, the child would be under the surviving parent, provided something was to happen to the custodial parent. Often times during reviews, and following evaluations, advice was stressed and expressed to the client. A major item, left unaddressed, was the beneficiary designation (Read more about beneficiary designation from Life Happens: https://lifehappens.org/blog/who-can-i-name-as-a-beneficiary-on-my-life-insurance-policy/ ).

The client left the generous life insurance death benefit to the child, as most parents would want the proceeds to go to the child. Although a trust was not established, probably due to the client's age, thinking "I have time." A great strategy would have been to establish a trust, placing the insurance policy inside the trust, and being able to designate how, when, and where the proceeds of the life insurance would be distributed.

As a result, given the manner in which things were left, the child's full care shifted to the surviving father. Although the father was a good father, the issue was, since the child was well under 18 years of age, the death benefit of the insurance policy was left to legal guardian/parent of the child and free to decide how those funds could be spent.

Fortunately, the surviving parent was a good father and the situation was a good one. But, what if the surviving parent was not a good parent? Can you imagine $1,000,000 in the hands of someone who could not be trusted and with a child, who just lost his or her mother? 

Definitely not what the mother would have wanted, but at the same time, could have been avoided with choosing to adhere to evaluations, recommendations, and experience being involved with a team in estate planning. Without a doubt, the mother was an awesome mother, and the father, fortunately, was a good father. 

This story had a happy as it could be ending to the story, but how many times does the situation go the other way? Single parents, please do not leave your situation to chance or gamble with loved ones. Find an insurance agent, experienced in estate planning, that happens to have a team that consists of professionals to get the proper planning put into place.