Point me in the right direction?

[AL HR]

What is the name of your state? Alabama

My dd is the sole beneficiary of my term life insurance and AD&D policies. The only problem is that she is 5 years old. My ex-husband, her Dad, would take over custody if I were to pass away and I want him to have the benefit of the policy to help raise her and fund her post-secondary education.

The policies are in excess of 600 thousand, however, outside of those, the "estate" and I use that term loosely, has no large assets. (mortgaged home and paid off car.)

On to my questions.

1) Is there state or federal law that determines how the money is disbursed upon my death to my minor child, or is it ruled by the policy that I have?
2) What is the best instrument (read cost effective and binding) to assure that the money from the policies is distributed in a manner that would best benefit our child?

My main worries are two fold. One, very few people have the acumen to invest and properly disburse a large sum over many years. (I don’t want him to blow it prior to her college education being paid for.) I would include myself in that group as well, so this isn’t meant to slam him. Two, I do want him to have access to the money prior to her being 18 so that she may benefit from what little I am able to leave her.


Thoughts?

 

[AL HR]

bump.... any advice?

 

[StuckOnStupid]

What is the name of your state? Alabama

My dd is the sole beneficiary of my term life insurance and AD&D policies. The only problem is that she is 5 years old. My ex-husband, her Dad, would take over custody if I were to pass away and I want him to have the benefit of the policy to help raise her and fund her post-secondary education.

The policies are in excess of 600 thousand, however, outside of those, the "estate" and I use that term loosely, has no large assets. (mortgaged home and paid off car.)

On to my questions.

1) Is there state or federal law that determines how the money is disbursed upon my death to my minor child, or is it ruled by the policy that I have?
2) What is the best instrument (read cost effective and binding) to assure that the money from the policies is distributed in a manner that would best benefit our child?

My main worries are two fold. One, very few people have the acumen to invest and properly disburse a large sum over many years. (I don’t want him to blow it prior to her college education being paid for.) I would include myself in that group as well, so this isn’t meant to slam him. Two, I do want him to have access to the money prior to her being 18 so that she may benefit from what little I am able to leave her.


Thoughts?

As you correctly state your former husband would be the guardian of your minor child. Life insurance benefits cannot be paid to a minor but of course Dad would have access to the funds for daughter's needs and perhaps his own misdeeds.

You could set up a revocable trust and with your daughter as the only beneficiary and then name a professional fiduciary such as a bank trust department as successor trustee. Dad would then have no access to the funds other than what the trust allowed or was consistant with state law. This of course would result in management fees charged by the bank but the fees are usually only about 1/2% to 1% of the total portfolio which may be a very small price to pay to "Bullet Proof" your Estate Plans.

You would change the beneficiary designation of your life insurance policy to the trust rather than your daughter.

Obviously you only need to be concerned with this for a limited number of years. Once daughter has graduated from college you could simply amend your trust to name her as successor trustee and beneficiary.