Children as Beneficiaries of Life Insurance Policy BY DUSTIN NOBLE | HOPKINS & HUEBNER, P.C. | ADEL OFFICE

For an individual with a young family, a common recommendation by virtually any type of advisor is for that individual to have life insurance.  If anything were to happen to you, life insurance proceeds would help facilitate a stable situation for your spouse and children moving forward.  When you have life insurance, you need to designate beneficiaries who will receive the insurance proceeds.  In general, there are two types of beneficiaries, primary and contingent.  The primary beneficiary is your first choice to receive the proceeds, and contingent beneficiaries would receive the proceeds if the primary beneficiary cannot receive the proceeds. 

In most situations, your spouse would be listed as the primary beneficiary.  If both you and your spouse pass away, you likely want the insurance proceeds to go to your children, but if your children are minors, how should you go about doing this?  In general, insurance companies cannot distribute proceeds directly to a minor.  Having a properly drafted will can make the answer to this question much easier.

As has been discussed in previous articles, another common recommendation for an individual with a young family is to have a will.  A common provision in a will is for a trust to be created if any property would pass to a beneficiary before that beneficiary reaches a certain age.  A trustee is named in the will and is responsible for managing that property until the beneficiary reaches a specified age.

Going back to the above question of how to effectively distribute insurance proceeds for the benefit of your children, if you have a will with a trust provision similar to that mentioned in the previous paragraph, you can list the contingent beneficiary as "the trustee of the Trust created under Article __ of my Will."  Then, you could name your children as alternate contingent beneficiaries if the Trust was not created (because the children were older than the specified age at the time of your death).

This is one of multiple reasons to have a properly drafted will if you have a young family.  If you do not have a will and are wondering if you need one, or if you have a will but are not sure if it accomplishes all of your objectives, you should meet with an attorney.