When you have a will: In your will, you probably named a guardian and a conservator for your children, in case both parents die. The guardian makes lifestyle decisions. The conservator handles the funds for the benefit of the child. Often, they’re the same person. The conservator will open a bank or investment account in his or her name, “held for the [named child].” That’s where the insurance money goes.
When you have no will or didn’t name a conservator: The court will appoint one. The conservator will have to post a bond and account to the court for how the money is used.
When your will sets up a trust (a “testamentary trust”) for the child’s inheritance: That’s a typical arrangement. You name a trustee, and can say when you want the child to get the money. But you may be surprised to learn that the money won’t go into the trust if you simply list the children on the insurance form. The insurer will make out a check only to the beneficiary named. If it’s minor children, the money has to go the conservator. To get it into the trust, the trust has to be the beneficiary, says attorney Kay Wilburn of Feld, Hyde, Wertheimer, Bryant & Stone in Birmingham, Ala. On the beneficiary form, write “Trustee of the Family Trust under the Last Will and Testament of [the insured parent].”
The same rules apply when naming minor children as beneficiaries of your retirement plan. It’s a simple fix. Just get new forms and ask the lawyer who drew up your will how to fill them in.
