Life Insurance to an 8 yr. old

[February2003]

What is the name of your state? Illinois

If my husband were to pass away, his 8 year old son would stand to receive about 50K from his life insurance policy. Since his son only 8 years old, what would happen to the money in Illinois? Will is somehow be set aside until he's 18, or will his guardian be able to access it? We are wondering if we need to set up some sort of trust to insure the money is there for him when he's old enough to use it responsibly.
Thanks!

 

[d8ddysgirl]

On most life insurace policies there is a contingent beneficary to hold the money or put it in trust until he is 18. I would have him name a contingent on the policy so the money will not be held with the state in trust.

 

[February2003]

I thought "contingent" beneficiaries are for the sake of if the primary beneficiary is already dead. If he were to make a "contingent" beneficiary to his son's life insurance policy, I don't think they would be entrusted to hold the money for the kid.... there are no spaces to explain that.

Are there problems with the state holding the money in trust? Is that what is the norm for when there are no other arrangements made?

 

[d8ddysgirl]

Contingent is for these cases. Like I have a 10 yr old daughter. My contingent named is my brother who will get the money from the insurance company and then put that money into an account for my daughter when she reaches a certain age. Some instances the insurance company will hold the money until the child is of age, if one is not named. That money will earn interst as well.

If the state gets ahold of it, its turns into a big mess. If I were your hubby have him ask his insurance broker about adding a contingent to the policy. He could name you contingent and then if something happened to him before child is of age you are held responsible for making sure that money is held into an account until child is of age. It is common in most states for a contingent to be named.