Being the policyholder of a life insurance policy, it’s important to think about how your beneficiaries are going to use the benefits you leave behind. You never want to think about death, but in some cases it’s important to properly plan for the future. If you want your beneficiaries to spend their benefits in a specific way, it’s possible to do and is a very common question. Having this part of your life insurance policy can be complicated and is not something you should do on your own. Further assistance from a lawyer is strongly recommended, because all laws vary from state to state.
Directing your beneficiaries to spend life insurance benefits in a specific way can be a very smart thing to do. It’s not that you don’t trust the person with your benefits you are leaving behind, it’s more of you wanting to help them in a positive way. When you set up this system, you can direct how the money can and cannot be spent. To simplify the process, you are basically opening a trust that your life insurance benefits will go to upon death. From there, your beneficiaries can take the money from the trust, but are only allowed to do certain things with it.
However, trusts can tent to complicate things, so it’s important to seek further advise from a lawyer or your insurance company. With a trust, there must be an appointed trustee. The trustee is a holder of property on behalf of a beneficiary. So basically, a trustee is the person that will handle all the benefits for the chosen beneficiaries. There are some drawbacks to a trust, and those usually deal with taxation. One reason for a trust is so that the estate will not go through probate upon death. Probate goes through the court system to determine many things like:
• Proving a will is valid
• Identifying the deceased persons property
• Having the deceased property appraised
• Paying off debts and taxes
• Distributing the remaining assets from the will
Ways to avoid a probate using a trust is a very smart way to save time, and even money. You would not have to go through the long court process to determine all things that were left behind. But before you make any decisions about opening a trust and naming a trustee, you should do further research and even call a law office to seek advice. Opening a trust is not something you should do by yourself, so it is recommended that you get a lawyer involved in the process.