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Trusts as Beneficiaries

Dennis D. Duffy · Jul 11, 2012 ·

Many people make life insurance a part of their estate plans for the purpose of making sure that minor children or grandchildren are taken care of after the insured passes away. Life insurance gives a cash benefit that can be used by the minor for living expenses and it does not have to go through Probate. However, if you designate a minor as the beneficiary, then there will be problems.

A life insurance company will not pay benefits directly to minors. If you think about it, this is a good thing. Minors should not be trusted to handle large sums of cash. The life insurance will rightly want a Court order that directs them to give benefits to an appropriate guardian. That will take time and it partially defeats the purpose of life insurance.

There is a much better way to leave a life insurance policy for the benefit of minors. Create a Trust for the minor’s benefit and name the Trust as the life insurance beneficiary. The life insurance company will pay out to the Trust and a responsible Trustee will already be in place to handle the assets for the minor’s benefit without the need for a specific Court order.

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Dennis D. Duffy
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Parents with Young Children, Trusts Revocable Living Trust, Trust Planning, Trusts

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