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Life Insurance and Estate Planning Considerations for Individuals With Minor Children - KJT 112210

Life Insurance and Estate Planning Considerations for Individuals With Minor Children - KJT 112210

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The use of life insurance is an important tool in the estate planning process. Married couples with children will obtain life insurance to make sure that that the surviving husband or wife and children are taken care of in the event of a spouse’s untimely death. Divorced individuals may also have life insurance policies to ensure their children receive appropriate support following their death.
The use of life insurance is an important tool in the estate planning process. Married couples with children will obtain life insurance to make sure that that the surviving husband or wife and children are taken care of in the event of a spouse’s untimely death. Divorced individuals may also have life insurance policies to ensure their children receive appropriate support following their death.

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Categories:Types, Business/Law
Published by: Hunt and Associates, PC on Dec 17, 2010
Copyright:Traditional Copyright: All rights reserved

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05/12/2014

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Life Insurance and Estate Planning Considerations for Individuals with Minor Children
The use of life insurance is an important tool in the estate planning process. Married coupleswith children will obtain life insurance to make sure that that the surviving husband or wife andchildren are taken care of in the event of a spouse¶s untimely death. Divorced individuals mayalso have life insurance policies to ensure their children receive appropriate support followingtheir death.For either the divorced or married policy holder, having life insurance is not enough, the policyholder needs to make sure that the proper beneficiaries are designated in the life insurance policyso that the proceeds will go to those that you intend on benefiting. The policy holder also needsto ensure that they have a testamentary trust (to be explained further in this article) that can holdthe proceeds and any other property that the couple intend on leaving their children.Married individuals generally want their spouse to receive the insurance proceeds and then their children. Many policies name the insured¶s spouse as a primary beneficiary and the insured¶schildren as contingent beneficiaries. Some policies do not designate a contingent beneficiary.Some policies are set up to leave the proceeds to a sibling or family friend; the couple relying on blind faith that the person they leave the funds to will use it for their children¶s benefit. Thesedesignations are problematic.By leaving the insurance proceeds to the children or by not designating a contingent beneficiary,if the children are under the age of 18 then the money will need to be placed in aconservatorship. This process requires conservatorship proceedings in which a court willappoint a conservator to manage the life insurance funds and other property left to the children,which is the common result where a couple do not have wills or the wills they have do notcontain a testamentary trust.The conservator may be a family member, family friend, or a professional conservator. The courtultimately decides who will serve as conservator. Generally, the conservator¶s ability to accessthe funds is restricted unless the conservator posts a bond, except in the case of a professionalconservator. When the children turn 18, the conservatorship is terminated and the funds aregiven to the children. In practical terms, your children could receive $100,000, $500,000 or $1.0million in cash when they turn 18. In Oregon, a conservatorship may be extended until a childreaches 21 under limited circumstances. However, a court must approve such an extension andmost courts are leery to extend the conservatorship beyond the age of 18.Some problems with a conservatorship are: (1) the children get all of the funds and other assetswhen they turn 18; (2) the process can be expensive; (3) the conservator¶s ability to use the fundsfor the benefit of the children may be greatly restricted; and (4) the court may appoint somebodyas conservator that the parents did not want to handle money on behalf of their children. Of course, some people like conservatorships in that the court supervises the process and ensuresthat the funds are being used properly.Divorced individuals also need to be concerned that their ex-spouse would have control over thelife insurance proceeds. Many people would like to avoid this result entirely. Of course, if a

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