This episode is to help families pick the proper contingent beneficiary for a life insurance policy. It is common for a husband or wife to list their spouse as a primary beneficiary. What about a contingent beneficiary?
If the husband and wife die at the same time, the money will go to whoever is listed as a contingent beneficiary. Some parents think it is natural to just list their kids as contingent beneficiaries. If the kids are minors, there could be some issues. The money could get caught up in probate, and it may take years for the money to serve its true purpose.
The best way to do it is to have a trust created by a family attorney. The trust is essentially an account where the money will go, with instructions on how the money is to be used. The parents choose a trustee, who manages the trust and makes sure the money is used as instructed.
You could list the contingent beneficiary to be whoever is going to be caring for your kids in the event of both parents dying. The risk you run there is they can spend the money however they want without any checks or balances or anyone monitoring the money. This is why the trust is the best way to go.
Make sure you consult an attorney to have the trust created properly.
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Music by Roger Clyne and the Peacemakers
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