#RichLifeLawyer Show 023: Estate Planning Beneficiary Designations for Minor Children

#RichLifeLawyer Show 023: Estate Planning Beneficiary Designations for Minor Children

Brian asks:

What to do for beneficiary designation if client has minor children. Of course, spouse is primary, but with little kids how do you make them secondary. My understanding is that with a springing trust in the will, you just generic of antibiotics name the trust as beneficiary and the trustee will take care of it. But, what if clients don’t have a will or an up to date will (i.e. more kids)? I assume that in WA that the lack of secondary beneficiary makes an IRA or company retirement plan (ERISA) or Life Insurance or even POD accounts for that matter go to the estate, which then would follow the will…

It’s a great question and one that I think a lot of people think about. When it comes to estate planning beneficiary designation decisions there can be a lot of moving parts.

To see what you should do, just watch the video below!

Cheers,

Christopher Small

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Christopher Small is a Seattle estate planning attorney who helps people get rich and live forever. He is also the owner of CMS Law Firm LLC.

Estate Planning Beneficiary Designations for Minor Children Transcript

Hey everybody this is everybody this is Christopher Small, this is episode twenty three of the Rich Life Lawyer Show. Welcome. You don’t know this if you’re watching us right now but we’re actually doing our first ever Facebook live recording. So I’m pot. I’m more nervous, much more nervous than I usually am. But that’s okay. That’s how we do it. If you want to see this live, you can go like our Facebook page. Just search CMS Law Firm. What we do is, we will say hello before we record this video then we will answer questions live on Facebook after the video. So, if you have immediate questions, that’s a great place to go. If you have regular questions, you can e-mail me chris@cmslawfirm.com and I will answer them. So, let’s get into today’s topic which is beneficiary designations for minor children.

This topic today comes from a financial planner buddy of mine who sent his question so I’m going to read it. Then we’re going to talk about it. Brian says what to do, what to do for beneficiary designation if a client has minor children. Of course, spouse’s primary but with little kids, how do you make them secondary? My understanding is that with this bringing trust in a will, you just name the trust as beneficiary and the trustee will take care of it. But what if clients don’t have a will or an up to date will. i.e. they have more kids. Alright so, first things first. There’s a lot in there probably. Beneficiary designations, what we’re talking about is if you have a life insurance policy, if you have retirement account, if you have bank accounts, you can designate beneficiaries on those accounts. Which means that if something should happen to you and you pass away, then the person you name as beneficiary will get the funds.

Will get the life insurance proceeds, will get all of that stuff. Brian’s question has two different things going on. He mentions that if you have a trust, do you make the trustee or the trust the beneficiary of your life insurance policy for example. Or do you do something else. The answer is yes, that is pretty much right. Okay so, if you have minor kids, the problem with just giving them life insurance proceeds out right is that what if they turn eighteen, they are just going to get a big fat check and be able to do whatever they want with that. But a trust does is allow you to manage those funds over time after the age of eighteen and basically dictate the rules for how that money is distributed. For example, a lot of people have, allowed the kids to use that money for support, maintenance, health, education, throughout their entire lives and then do like a third of the assets distributed at twenty five. A third distributed at thirty. And a third distributed at thirty five. That’s what a trust does. Now, as far as beneficiary designations go, it’s really really important that you have those up to date because your will will not overtake those beneficiary designations.

So for example, if you are married and your wife is your designated beneficiary and you get divorced and she remains the beneficiary, when you die, she’s going to get those insurance proceeds. So, the first thing you do today is just make sure beneficiary designations are up to date. The second thing that you do is if you have minor children, really consider making, creating a trust to handle that money and then make your the trust. If you do not have a trust, and something happens to you, those funds will just go into your estate and it will be distributed according to what your will says. Most wills to answer the final question about having more kids or things change, most will and most trusts will account for new kids and simply split those shares equally across all of the kids that are living. All right so, that is it. I know I talk super fast, and hopefully you got a lot information. If you have follow up questions, you can e-mail me chris@cmslawfirm.com and you can leave a Youtube comment. You can find me on Facebook and as you can do whatever you want. You can call us too if you want. So, that’s it for today. Thanks for the question Brian and looking forward to hearing your questions.