It Is Easy To Protect Your Grandchildren

Let’s say you have two married children—Karen and Mike. Karen’s spouse is just wonderful, but Mike’s wife is another story. Karen has 2 minor children and Mike has 1 minor child. You have a $250,000 life insurance policy, naming Karen and Mike as beneficiaries.

Mike dies on March 1. You die on March 15. You did not remove Mike’s name as a life insurance beneficiary. The life insurance company will pay $125,000 to Karen. The life insurance company will pay $125,000 to Mike’s wife. The vast majority of beneficiary designations default to spouses, not to children and not to the other named beneficiaries.

What can you do?

You can name Mike as a beneficiary “per stirpes”

In plain English this means that Mike’s minor child would inherit Mike’s share of the life insurance proceeds. Without a Revocable Living Trust, a court ordered conservator will need to hold this inheritance in a restricted account for Mike’s child, until the child is 18.

You can set up a Revocable Living Trust

You name the Revocable Living Trust as beneficiary, instead of Karen and Mike. The Trust states 1) the $250,000 life insurance policy will be split beween Karen and Mike, 2) if Karen dies before receiving her $125,000, her $125,000 will be distributed to her children and 3) if Mike dies before receiving his entire $125,000, his $125,000 will be distributed to his child. The Revocable Living Trust can say how old a grandchild will be before receiving his/her inheritance outright.

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