Ensure Your Life Insurance Will Protect A Young Child

How can you ensure that your life insurance policy will provide for an underage beneficiary? In many provinces, children under 18 cannot have control over the money you have planned for their protection (the death benefit) if you should die. What is the best way to make sure the money is used as you intend?

To properly protect minor children, you need to carefully think about the complexities if you should want them to be the beneficiary of your policy. This is also part of good estate planning. There are many factors to consider. If your minor child is the beneficiary, you can appoint a trustee to receive and manage the proceeds until they turn 18. This obviously should be a dependable individual, such as your spouse or a close family member.

It will ensure your beloved child is looked after as they grow up. Unless, of course, the trustee is no longer around. What happens then? If there is no trustee, the court will designate one to oversee your child’s care until they turn 18. Usually, a family member would step into this role. This trustee will be paid expenses out of the death benefit.

You could also name your estate as beneficiary and designate your child (and trustee) as the benefactor or one of the benefactors in your will. The funds will be used according to the terms of your will. However, keep in mind that the death benefit will be subject to probate tax which is part of settling your estate.

As your family grows, and children mature, this kind of planning is always fluctuating. It’s important to review your insurance documents regularly and confirm that your planning accommodates changes in your family structure as the years pass.

One valuable point to consider is whether your beneficiary should be named as ‘revokable.’ This means you can change your beneficiary at any time without telling them. With this, you can change around your planning as needed. An irrevocable beneficiary requires written permission from the original beneficiary for you to make changes. This could hamper your efforts.

Ensure your minor child is protected and supported financially if you aren’t around to look out for them. Discuss with your Financial Advisor the complexities involved in naming children as beneficiaries.