How are you disbursing Life Insurance Proceeds if You and DH/SO die together?

[newmommy]

I realize it's a morbid question and I apologize in advance. I am in the process of updating our will. But I'm stumped on something on a section in my addendum and wanted to see what others were doing.

I know that Minor Children (Under Age 18) cannot inherit assets. I have named my Aunt-In-Law as Executor and Property Custodian of DS (Age 3.5...our Only Child).

I am leaving financial instructions to her and I'm stumped.

If DH and I die together, DS comes with alot of money from the Insurance Policies combined alone at least $1 Million Dollars.

But, Aunt-In Law is financially secure and will more than likely put that money in savings/investments

But how should we disburse it to him? I certainly wouldn't give an 18 year old kid $1 Million Dollars. He'd blow it! DH and I are thinking disbursing it in Internals:

Age 18- maybe $100,000?

Age 21- another $100,000

Age 25 (a bit more mature)- maybe $300,000

And the rest at Age 30.

What are you doing?

[Jay'smom]

I'm taking it with me. Just kidding.

Can you put in a rider to provide more at age 18 to pay for a college education? (If that's something important to your family.) We're doing that for DS. At the rate tuition is increasing, I'd hate for him to not be able to attend the university of his choice just because the money's tied up for a couple more years. $100000 would surely cover it, but then again, who knows?

Or maybe the rest at age 30 or earlier if he marries or has a child. Something like that.

Then again, it's your money so you can do whatever you want.

[Periwinkle]

to the children's trust established in our wills, which will support our children until they graduate from college or reach age 23 whichever occurs first.

[HollyBearsMom]

We are leaving the money in a trust and have assigned an executor of trust to have full access to money that basically states "to support the well being of child" in all kids of legalese. Even though the people he would go to are *very* financially secure I do not expect them to cover his living expenses. The money would go to cover approved expenses including living, household, medical, educational etc. We will leave a few mill based on investments, insurance and salable assets if we died tomorrow but after taxes etc and then everything else by the time he hit 18 even with great investing it will have gone down some. He will have full access to the interest at 18 which our accountant estimates to be between 30-50K a year depending on how we are investing at the time. He could then petition the executor for other expenses-further degrees, travel, buy a house/condo. At 25 he gets total access.

[elmh23]

What we did is have it pay for dd's college when she went. If she chose not to go, that's fine too. Any left over money would be given to dd at age 25.

My mom used to work for a lawyer who handled the wills and trusts for VERY rich people in Los Angeles. She saw way to many kids get to much money at 18 and go downhill or lose it all.

[fallriverfox]

Originally Posted by Periwinkle

to the children's trust established in our wills, which will support our children until they graduate from college or reach age 23 whichever occurs first.

That's what we're doing too. How did you come up with 23? We though 21: too young, 25: too old. I think the lawyer though we were nuts for just averaging the two.

[Doodlebugsmom]

Originally Posted by HollyBearsMom

We are leaving the money in a trust and have assigned an executor of trust to have full access to money that basically states "to support the well being of child" in all kids of legalese. Even though the people he would go to are *very* financially secure I do not expect them to cover his living expenses. The money would go to cover approved expenses including living, household, medical, educational etc. At 25 he gets total access.

That's pretty much exactly how we set ours up.

[PajamaMama]

We have a trust set up in our wills, the trust executor would have to approve expenditures as 'for the well being of the minor' blablabla, but they would inherit their full share and full access at 25. Bleargh. Hard to think about, for sure!

[~member~]

Even though the people he would go to are *very* financially secure I do not expect them to cover his living expenses.

Wouldn't they be able to get Social Security Death benefits and not need the life insurance monies?

[Periwinkle]

Originally Posted by fallriverfox

That's what we're doing too. How did you come up with 23? We though 21: too young, 25: too old. I think the lawyer though we were nuts for just averaging the two.

Well, to go into more detail, we give them til age 23 for college specifically. For our kids, they'll be 22 when they graduate from college. So we figured we'd give them another year as a cushion... since we have 3 kids to get through college we can't afford to have one mess around in college and drain the money for the rest if it's not toward a degree, and if they want/need to take 10 years on college they can do it with their own money. As for when we give them control of their trust, I'd have to check but I think it's 50% at age 23 and the rest at age 30.... so if they blow it they can still have a little when they've gotten it together. We also stipulated that any money for something BIG like a wedding or a down payment for a house comes out of that child's individual portion (e.g., it gets deducted from their portion received at age 23 or age 30 whichever comes first).

[GenomicsGirl]

We have left all of our insurance and assets to the children as a trust fund. My bro and his wife will get our kids and our dog (including their money) and will use and control the trust fund according to their requirements. They are exceptionally responsible and frugal and we trust them implicitly. Dh's sister and parents get $10K each - my parents & bro/sis get nothing (because I don't work).

[fek&fuzz]

It's often a good idea to include in the trust a provision allowing the trustee to withhold large disbursements if the child's living situation makes it unwise to do so - gambling, alcoholism, drug abuse, etc. If the kid's 23 but on drugs and gambling (hey, he lost both his parents, it could happen) a $100,000 check will send him straight to the grave or jail.

[fek&fuzz]

Originally Posted by MamaInTheBoonies

Wouldn't they be able to get Social Security Death benefits and not need the life insurance monies?

Depending on the number of kids involved (my parents had 5), the new guardians may need to buy a new house or put an addition on the existing house, one spouse may need to stop working to deal with the children and the trauma they are going through. SS death benefits wouldn't cover all that.

[JustVanessa]

My mother is the one who gets my life insurrance if I die. She is only 45 right now so it should be fine to leave like that for a while. She can give the money to ds (or his father) as she sees fit. I trust her judgement and don't really want the money tied into a contract that she can't touch.

[fek&fuzz]

Originally Posted by JustVanessa

My mother is the one who gets my life insurrance if I die. She is only 45 right now so it should be fine to leave like that for a while. She can give the money to ds (or his father) as she sees fit. I trust her judgement and don't really want the money tied into a contract that she can't touch.

Keep in mind that if you are leaving it to her outright (and not in a trust for your son) it is subject to attack by her creditors, or if she gets married or divorced it will get tangled up in those situations, or if she gets sued. What if she dies? Has she prepared a will directing that those funds go to your son's father for his care and education, or to your son if he is 18?

Also, if she were to have a health crisis that required nursing home care, those assets would be considered totally hers, and she would be required to spend them on her care, even though you had "meant" for them to be for your son.

I urge you to make some additional provisions for that money, to protect your son in the event that you are no longer around to do so. You don't know what will happen in the future, and it is too important to just hope for the best.

[Kidzaplenty]

:

[UmmBnB]

Our kids get all college tuition and basic living expenses and then they are on their own until 31 when they get the rest.

My brother and I got a decent inheretance from a childless aunt when I was 10. My parents invested it and it grew nicely. I got it when I turned 18. It lasted 2 years and not a cent went to college as that was already covered from other investments. I have nothing to show for it. My brother invested his again and probably still has it plus bagillions more.

But my kids are of my blood and my temperment and, well, there's no way in hell they are getting it before they are 30

[Panthira]

Hmmn this is a great question!

Both DH and I have life insurance, plus he has work life insurance, so it would be over a million if we die. 3 of the kids would go to my ILs in Canada, while the other two, the oldest ones, would stay in California and probably be of age. How do you put money into a trust from life insurance? We don't have any real assets besides a 401k and small 529 plans...

My ILs are retired and still fairly young (mid 50's), but they live off of interest from investments. They are penny pinchers to the extreme, and I'm not sure they'd use the money how we'd want it used. For example, for sports or art classes, private education, summer camps, etc. I think they'd hoard it and invest it to make it grow, which is good in one regard, but I'd really want my children to see the benefits of the money all throughout their childhood, and into adulthood. Of course, there are SSI benefits, but I'm not sure how that works if they are in Canada...

[ashleyhaugh]

hmmmmm.... we dont have kids yet, but im not sure what we'd do..... dh doesnt really have much family, and mine is horrible with money(my sis is trying hard, now that she's out of school, but my mom is pretty much homeless, and my 45yo dad lives with and mooches off his mom ..... i imagine we'd put it in a trust so whoever gets the kids could use it to raise them and pay for school and stuff, and then give each kid a share when they hit 25 or so...... i have an inheritance coming next year when im 26 from my g.g. grandparents, and while its not a ton (i think around 40k) i know i couldnt have handled that much money when i was 18. we got in a car wreck when sis and i were in middle school, and sis was hurt the worst and ended up with a 16k settlement. my mom had it split 4k at 18, 19, 20, and 21, and my sis managed to blow all of it

[HollyBearsMom]

Originally Posted by MamaInTheBoonies

Wouldn't they be able to get Social Security Death benefits and not need the life insurance monies?

To me it doesn't matter. All money available after our death goes into the trust. If the SS death benefits cover everything-great. But if it doesn't I do not expect them use their own personal resources to support my son. They have children of their own, their own retirement to think of. I also don't want their wants/needs to be compromised by the addition of my son.

Now I also have to say I trust these people implicitly and they would *never* consider anything to do w/ my son a compromise/burden. But if we have the $$ to support our son after we are gone why wouldn't we?