Having a family means you want to take care of them. So, what happens if you die suddenly, leaving a hole in your wake? You might want to provide your spouse, children or others with life insurance as support. Still, how do you make sure the money benefits the person or purpose whom you want to help? Let’s discuss the ways you can set up your policy to go to your family.
Naming a Beneficiary
When you die, your life insurance can provide a financial sum to a person or party of your choice. In the case of your family, it can help them pay funeral costs or supplement your own income for a time. You can also use it to go to certain expenses, like a child’s college education. Where the money goes will depend on how you structure your policy.
At the time of enrollment, you can name a beneficiary of the policy funds. Many people leave their money to a spouse or other adult family member. Following your death, the spouse can make a claim on the policy. The insurer will then need evidence that you indeed have died. Afterwards, they will usually promptly issue the policy’s payouts to the beneficiary.
However, simply naming a beneficiary might not meet your exact needs. The thing about basic coverage is that once a beneficiary receives the money, they can often use it to their preference. To target the use of your money, you’ll have to include extra stipulations in the policy itself. That’s often a legal process.
Many people who want to direct the funds of their life insurance do so through a trust. Upon death, the life insurance funds go into the trust. Within the trust can exist rules on how, when and where a beneficiary can use the policy’s funds. Most people place a trustee in charge of overseeing the funds. This might be a legal entity, estate manager or even a different family member. The trust essentially better protects the use of the money.
Trusts often come in handy in the case of families where young children stand to benefit. You cannot leave a policy directly to an underage child. However, you can place the money into a managed trust, with stipulations for the child’s welfare. The money in the trust can support the child’s care, education and other needs in a generally secure way.
Talk to your agent at 757.583.1828 about the ways to structure your coverage to your family’s benefits. With the appropriate care, you can make sure that money you entrust to your family goes to the right place.
Also Read: Life Insurance and Final Expenses