While your children are still young, they're going to rely on you to look out for their well-being. It's something you are proud to do, but the unfortunate truth is that tomorrow is not guaranteed. What if something were to happen to you? What would happen to your kids if you weren't there to provide for them? That's a tough question that all parents need to ask themselves.
With life insurance, you can take one big step towards providing for your children if you pass away. If you're concerned about how to leave money for your dependent children, this is often a great way to do so. Yet, you often have to make special arrangements for your children if they are still minors. One of the ways to do so is by establishing a trust.
How Life Insurance Trusts Work
When you name the beneficiary of your life insurance, that person can often choose to spend that money as they wish.
Still, some people want to have more control over how the beneficiaries use their money. For example, you might want the money to go to the educations or medical needs of your dependent children. Or, you might decide to leave the insurance coverage to the person who will become the children's guardian if you die. You will want that person to follow your stipulations when it comes to using the money to care for your kids. This is where a trust can come in handy.
With a trust, you leave instructions on how survivors can use the insurance. That money effectively becomes earmarked. The trust will only allow the money to go towards the costs allowed in the rules of the trust.
Setting Up The Trust
Work with your insurance agent and a financial adviser to determine how much life insurance you need. Then, you can set about outlining the trust's stipulations.
Usually, you will name a trustee to manage the trust. This is likely the person who will provide for your children and manage their money. Children under the age of 18 cannot be trustees.
You can often stipulate how and when the trustee receives the life insurance benefits. This can often help your children better receive financial protection if they don't have experience managing money on their own. You can often stipulate that your children receive control of funds in the trust when they reach a mature age.
As you set up your life insurance, turn to Dean Heckle & Hill for assistance. One of our experienced agents can help you get the protection you need.