Trustee vs Beneficiary in court ordered life ins?

[BalloonGirl]

What is the name of your state (only U.S. law)? NH

I've been divorced for about 6 years and have always had difficulty getting my former spouse to comply with the terms of our divorce decree.

My latest battle has to do with the court ordered life insurance.

The decree reads as follows:
"(Name of former spouse) shall maintain life insuranee coverage in the amount of $XXXX and shall designate (me) as trustee to receive said life insurance proceeds for the benefit of the parties' minor children. Such coverage shall continue until the children have reached the age of 23 or completed their post-secondary education, whichever is sooner."

There is a paragraph following whereby I have to maintain coverage with him as trustee.

The final paragraph of that section reads:
"Each party shall provide the other with proof of said coverage upon written request and proof shall be provided within thirty (30) days of the final decree and within thirty (30) days of such written request, but not more than twice a year."

I have asked numerous times for this proof, since he threatened to take me off the policy. I submitted a copy of the decree to our life insurance company to make them aware of the court's ruling.

I finally received a document from him - dated April, 2007 (2 1/2 years ago) stating that the children were the beneficiaries, and his sister is the contingent beneficiary. I have asked him to provide a current proof of beneficiary, as his document is quite outdated.

He subsequently emailed me stating: "Per the State of NH Insurance Dept. and an insurance agent a trustee of a life insurance policy is not the beneficiary."

Is his removal of me from the policy a violation of the agreement?

Is it true that he doesn't have to have me listed on his life insurance at all, or does it need to be adjusted?

Mine simply has him listed as the beneficiary, with the children as contingent beneficiaries. Do I need to change that?

Thank you in advance for any advice. Happy Halloween!

 

[mistoffolees]

What is the name of your state (only U.S. law)? NH

I've been divorced for about 6 years and have always had difficulty getting my former spouse to comply with the terms of our divorce decree.

My latest battle has to do with the court ordered life insurance.

The decree reads as follows:
"(Name of former spouse) shall maintain life insuranee coverage in the amount of $XXXX and shall designate (me) as trustee to receive said life insurance proceeds for the benefit of the parties' minor children. Such coverage shall continue until the children have reached the age of 23 or completed their post-secondary education, whichever is sooner."

There is a paragraph following whereby I have to maintain coverage with him as trustee.

The final paragraph of that section reads:
"Each party shall provide the other with proof of said coverage upon written request and proof shall be provided within thirty (30) days of the final decree and within thirty (30) days of such written request, but not more than twice a year."

I have asked numerous times for this proof, since he threatened to take me off the policy. I submitted a copy of the decree to our life insurance company to make them aware of the court's ruling.

I finally received a document from him - dated April, 2007 (2 1/2 years ago) stating that the children were the beneficiaries, and his sister is the contingent beneficiary. I have asked him to provide a current proof of beneficiary, as his document is quite outdated.

He subsequently emailed me stating: "Per the State of NH Insurance Dept. and an insurance agent a trustee of a life insurance policy is not the beneficiary."

Is his removal of me from the policy a violation of the agreement?

Is it true that he doesn't have to have me listed on his life insurance at all, or does it need to be adjusted?

Mine simply has him listed as the beneficiary, with the children as contingent beneficiaries. Do I need to change that?

Thank you in advance for any advice. Happy Halloween!

Yours is wrong and his is partially right.

Beneficiary is the one the money goes to.
Trustee is the one who handles the money for the beneficiary.
Contingent beneficiary is the one the money goes to if the beneficiary is dead or declines the money at the time the policy is paid.

Yours is wrong because you have the money going to him. The kids only get it if he dies before you.

As I read what you've written, the children should be named as the beneficiary. Contingent beneficiary doesn't matter since the money is for the sake of the kids and if the kids die before he does, then they really don't need the money (one could get into arguments about estates, etc, but in the end, the divorce decree obligations would end upon the children's death, so he would no longer have any obligations. That is, the clause stating that he has to maintain insurance is understood to mean 'he will maintain insurance until the children reach 23, graduate from college, OR DIE, whichever is first'. Fortunately, that's generally not a likely event so it is often just assumed rather than written.

The part where his may or may not be wrong is the trustee part (his statement that the trustee is not the beneficiary is correct, but incompete). In my state, I don't believe you can declare a trustee on an insurance policy-only a beneficiary. I don't know about your state, but the wording of the email he provided suggests that you CAN name someone other than the beneficiary as trustee. If that's the case in your state (simply ask your agent), then do exactly what your decree says - name the children as the beneficiaries and name your ex as the trustee.

If it's NOT possible to name a trustee in your state, there are several possible factors:
1. If he dies and the money is left to the kids while they are minors, it probably wouldn't be an issue. You (as the parent) would have an obligation to use the money for their benefit, anyway. Odds are that the money would go to the kids and you would manage it for them - until they turn 18.
2. If he dies and the money is left to the kids while they are adults (or they become 18 while you are managing their money), they could do whatever they want (picture an 18 year old blowing their insurance money in Cozumel) so you could be failing to do your duty under the divorce decree (to manage the money for the benefit of the kids, presumably including education).

I would propose a simple solution that will cost a little money, but not much. Again, this only applies if you are unable to name him as trustee on the insurance policy or if the trusteeship automatically ends when the kids turn 18.

Set up 2 trusts (one for your insurance policy and one for his). I'll give the example of how your insurance policy would work - reverse it for him:

1. Create a trust with your ex as the trustee. This trust would not be funded at this point (you might need to put $1 in to make it legal, but check on local rules).
2. Have your insurance policy name the TRUST as beneficiary. Your ex, as trustee of the trust, would therefore have the ability (and the obligation) to spend the money for the kids' benefit.
3. If you wish, you could set up a friend, relative, attorney, etc) as a contingent trustee - which would only come into play if your ex-husband dies. That takes care of the situation where he dies before you.
4. Again, if you wish, you could set up a time limit on the trust. For example, you could have the money distributed to the children for their own use when they turn 23. Or 30. Or whatever you want. Or you could have the trustee change to a relative when the youngest child turns 23 (might be a bit risky, but I think it would be OK). That would take care of the situation where the money isn't all spent when the kids turn 23 or graduate from college.

Trusts are definitely a case where a good attorney is worth their weight in gold. First, someone who does trusts all day can whip a good one out in no time so it will cost you less than someone who only does a couple a year. Second, a badly written trust is as bad as a badly written divorce decree - maybe worse because you won't be there to defend yourself.

 

[BalloonGirl]

Fantastic!

I can't thank you enough for the detailed explanation and spelling out the steps I need to take to have this set up correctly.

The only part of your explanation I don't like is where you told me I was wrong, lol!!!

JK, I so appreciate it, and I am so grateful I stumbled upon this forum.

Thank you again for sharing your expertise with us!

 

[mistoffolees]

The only part of your explanation I don't like is where you told me I was wrong, lol!!!

Actually, you'd have liked it less if you died and the money went to your ex-husband instead of the kids (which is how you had it set up).

 

[BalloonGirl]

Exactly, that would have made me very unhappy!!!

So, I do appreciate the advice - I am going to contact my agent first thing Monday to make the children my beneficiaries until I can get the trust thing taken care of...

I have to get a will done as well, since I'm the only one listed on my home. So... if I follow your train of information, if I were to die, the house would go to my children, but in reality, to my ex husband until they turned 18?

 

[hopekendrick]

I am just giving advice

There is a simple way to do this and you take care of everything in two documents, You can change your beneficiary to the estate of and put your name there,that takes care of that, given your children will get it. In a will of which I have in my hand at items 3 - 5 gives you a chance to appoint 3 people that you trust that would take care of this for you. I am doing mine this way, because I want different people to have different things, so this is what my agent suggested. In one swift move you have taken care of both with two pieces of paper,and you now dont have anything to worry about. If you are going to see your agent tell them what you want to do, and he can suggest what he thinks is better for you, keep in mind a will does not have enough room on it to put ages and all that in it, you would have to attach apiece of paper to it for that for the trustee, but you want your childrens names to go in the item # 3. thats where you leave the estate to the names. the #4 is where you appoint someone. All wills look different depending on what you want done, so you just have to go to probate court, and ask. you could also still name your children as beneficiaries on life policy, if you feel better about it, but i am thinking that the will will over ride that anyway if under age.I can ask my agent for you if you want me too. Good luck, it should be a way for you to make sure that he has his life policy enforce all the time.

 

[mistoffolees]

There is a simple way to do this and you take care of everything in two documents, You can change your beneficiary to the estate of and put your name there,that takes care of that, given your children will get it.

Yes, that would work - except that her ex husband would have to be the trustee of her estate - which is probably not a good idea.

 

[BalloonGirl]

Thank you for that clarification.

I do not want my ex as trustee of my estate, simply the life insurance as court ordered. I don't even want him having custody if I should pass, but I know that would be next to impossible to set up. So... I'll do my best to stay alive for a long, long time, at least until my youngest is 18 ;-)

 

[hopekendrick]

just giving advice

no this will is where you can ut anyone as the trustee of your estate, you put the life pollicy beneficiary as your estate of your name mary smith, or who whoever and thats all you put. Remember one thing, that you said is that you are no longer on there that his sister is. So if he can do that you can also. On the will it will name your children on first line in item #3, then under it you want to skip because it says thats if the top line is decreased, your children will not die before you. you go to item #4 and pick who you trust more than anyone, and put them to be the trustee. That way, he cant do anything at all. If something happened to you, and then you could give the kids to them, i mean think about it he does have his sister down, I hope you get along with her. You will have to deal with her.Its really a mess, because if he dies, you have the children already, and so you would have to deal with her. If you die then he will get the children but you dont want him to have the money, can understand your point on that. so i guess he will ahve to deal with whoever you pick, just like you ahve to deal with his sister. How old are your kids?I would go and talk to your agent monday am, and see what he thinks, then go to probate court and ask them, before youw rite down anything, at least in the will, you can do beneficary like you want it. I dont wont to tell you wrong,, but I was told once you have a will , then life policies automatically make the beneficiary be to the estate of because thats money and its assets,of estate.I promise you though the state will make sure your children are watched over very well.But you dont wont them to apppoint a trustee, not if you want someone yourself.Would your bestfriend do it? you should also take in consideration what if you get remarried, or he gets remarried to someone your kids dont like. Can happen.maybe you should have a meeting with your agent and estate lawyer at the same time. they are both working for your benefit, not against each other. If I wanted anyone on my side it would be those two people. Goodluck,

 

[hopekendrick]

giving advice

wow your kids must be young. Go to your agent and do that first, and dont name him as nothing on anything, until you can talk to a estate lawyer.You have a mess on your hands girl, with a messy divorce like that. you can tell by the way you talk about him that it was a mess. feel sorry for you.

 

[nextwife]

Actually, you'd have liked it less if you died and the money went to your ex-husband instead of the kids (which is how you had it set up).

IF the purpose the life insurance is to replace Child support the deceased parent can no longer provide, the benefit should be to the surviving parent. If the purpose is to provide them an inheritance when they become adults, it should be managed by a trustee. The proper party to name would depend on the intent.

 

[mistoffolees]

IF the purpose the life insurance is to replace Child support the deceased parent can no longer provide, the benefit should be to the surviving parent. If the purpose is to provide them an inheritance when they become adults, it should be managed by a trustee. The proper party to name would depend on the intent.

Actually, the proper party to name would be to follow the court order - which was explained in the first post.

My initial suggestion meets the requirements that the court laid out. Some of the other suggestions here (including yours) do not.

 

[hopekendrick]

its half of each one of them

Partly it would be for her child support if something happened to him now, and then later in life it would be their inheritance. they would get that any way at anytime of their life whenever he died. She is stuck both ways, because at some point they would get inheirtance from her also. She so needs a estate lawyer. I know this because I got my moms when she died at age of 45, from car accident. I got mine from dads a few years ago. She could always set aside say 25,000 for each child for a college fund. use that amount for the life policy. They arent going to get it anyway until they are 18, and any amount over that can be used by the trustee for them until then. that way its fair,at least for the kids from her. their father needs to do the same thing, but add child support to his.That will at least help them. Needless to say I would still be going to three places monday am, 1. probate office, to find out alot of things, and 2. ins agent, to do beneficiary, and 3 to lawyer. let us know what happens.

 

[mistoffolees]

Partly it would be for her child support if something happened to him now, and then later in life it would be their inheritance.

That's not what the decree says. It says that they each need to have insurance for the children's benefit until the children are 23. If the parents are alive when the kids reach 23, there is no more obligation to have the insurance - ergo, no inheritance.

 

[hopekendrick]

giving advice

Really in all reality of this whole messed up thing, When either parent dies, before theya re 18 its not going to have anything to do with child support, it will go straight to in heirtance. It will be theres anyway, you just need a trustee to look after it until that time comes, i was just wandering where they canme up with 23, they including college in this, I am guessing. She can take out a life policy and get one pretty cheap now for say 250,000 that would give each child a good amount to go to college on, it would be cheap on her, if she doesnt smoke have any health problems. I know mine is like 22.00 a month for what i have and its over 50,000. So she could get a good one, for around 40.00 a month. I am pretty sure though that the life policy is going to be part of the estate, since they are divorced. Moms just went straight to dad, and he didnt do hers as part of it, because we were both over 18. I would be going to all of these places in the morning though. She needs to make sure that he has a huge sum to cover their college fund also. i know she will use this for her childsupport or to help with them though, but she can always set a certain amount back for each one of them, oh I forgot she has to deal with his sister. She needs to pick either her sister or brother then, someone that the kids get along with well in the family cause they might have to live with that person.