When you buy a life insurance policy as part of your estate planning efforts, you get to pick beneficiaries for the plan. These are simply the people who get paid when you pass away and the policy pays out. If they do not match what you write in your will, the beneficiary designations take precedence. It’s important to get this right.
One question you may want to ask, then, is how these people will use the money. It may depend on their age.
For instance, suppose one of your children is 21. You hope they will use the money for college. If they get $200,000 all at once, though, are they really going to pay tuition with it? As an adult, you know how valuable it can be to eliminate your student debt. For the student, however, it may feel more exciting to buy a sports car or go on a trip with their friends. They may wind up using the money in a way that you do not think is wise. This could make you feel like they’re going to waste all of the money you have invested by taking out the policy in the first place.
If you are worried about that, you may want to start looking into your legal options. Would it be better to put the money into a trust and have it pay out to the trust instead of your heir? You can then designate when they get it or how they can use it.
Careful estate planning is the key to success for your family. That’s one of the many reasons it’s smart to engage professional assistance during the process.