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Life insurance

Twix's picture

Looking for advice, questions to ask and experience on handling life insurance in a blended family (DH two kids from a previous relationship and 1 child together).

We recently set up policies but I've been thinking about it and I have some confusion/concerns. I am going to talk with the insurance rep again but thought I would pose this here as well.

Two issues

1) if we both pass, we each picked a different trustee to handle our policies (FIL and my sister). Now would amounts be distributed evenly between beneficiaries or would that be up to the trustee unless specified in a will. DH said to me he would like his split three ways but unless specified I think FIL may favour the older two seeing as how BS would have my whole policy.

2) if only one of us passes the other is named as trustee. So did we essentially leave each other out from receiving anything. If so, what would be a reasonable way to divide that. I would like it that if one passes it goes to the other who is left to look after everything but being put as trustees makes me think this isn't how it works.

Like I said I will be going to the professional but thank you for any advice. And I totally welcome any additional questions that I should be asking.

justkeepstepping's picture

When I filled out our paper work it had a spot for multiple beneficiaries and the percentage they would receive.

futurobrillante99's picture

Designate your beneficiaries with the policy and then reiterate it in your will.

My policies allow primary beneficiaries and secondary beneficiaries. My policies through work are split evenly between my husband and my 3 bio kids.

Steppedonnomore's picture

It is my understanding that life insurance falls outside of the scope of a will. If a will states that Person A inherits everything but Person B is named as the beneficiary on a life insurance policy then Person B still gets the life insurance proceeds. That money is not considered part of the estate. My 2 children are named as primary beneficiaries with each getting 50%; my grandchildren are named as contingent beneficiaries in the event one of my children predecease me.

strugglingSM's picture

Most life insurance policies will let you identify beneficiaries and specify the percentage of the benefit each would receive.

Also, I think some policies will allow you to specify a primary beneficiary and then secondary beneficiaries, but I'm not sure. Do you have a customer service rep at the life insurance company?

Twix's picture

Yes that's probably the case. We had a guy come over Sunday morning, which was not a good idea as most of my attention was focused on minding BS, so meeting without the kid in tow is needed. I was hoping DH would be able to answer my questions later but I should have known better.

ESMOD's picture

I also believe that for insurance policies you actually designate beneficiaries to receive payments that are set out clearly.

In fact. Insurance proceeds do not need to go through your probate from my understanding and division of assets. In fact, your real estate may not either if it is held in certain ways..(jointly). It is clear cut who the beneficiary is because you specifically note that in your policy documents. Now, if that beneficiary has passed away and you do not update it... that may be a questions (like you might want your DH to be the beneficiary of your policy but what if he dies and you never update it???).. I actually believe you can stipulate a second in line beneficiary or beneficiaries as well.

Perhaps a trustee is needed when you have minor children involved? I'm not sure about that/.