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Why Having a Life Insurance Policy for the Benefit of Minor Children Will Not Work Without an Estate Plan

By Sabrina Winters

Life Insurance is a great estate planning tool.  It is not only a way to provide for your surviving spouse but also a way to provide for your children after you pass.  However, if the intent is to provide for your children you must realize that if they are minors and you do not have a Last Will and Testament or a Living Trust, your children will not be benefited at all!

Here is the scenario:  Husband and Wife decide to take a long awaited trip together without their minor children.  While away, tragedy strikes and husband and wife are both killed.  They both thought they were planning ahead when they purchased $1,000,000 Life Insurance policies naming each other as the primary beneficiaries and their minor children as the secondary beneficiaries.  However, they did not have a Last Will and Testament or a Living Trust creating Trusts for the benefit of their children.

The unfortunate outcome of not planning the proper way is that now, the minor children they thought would be taken care of with the Life Insurance proceeds are actually not even going to get to see the money until they are 18.

In North Carolina, like many other states, you are considered a minor until the age of 18.  Until then, children younger than 18 cannot control an asset that large.  So, instead of spending the money and investing the time today to create a Last Will and Testament naming a Trustee to manage the proceeds from the Life Insurance policy in a Trust for the children (a Trust that would have been used for the health, maintenance and support of the their children), the children will have access to $1,000,00 when they are 18!

This type of scenario is not atypical, but very common.  The money that you invest today to have a properly created Estate Plan with a qualified attorney, will be more than worth it when the time comes.

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