Step-parent and wife not named beneficiary

[souptonuts]

What is the name of your state? Illinois

I'm married to a man with 2 minor daughters (7-8yrs) from a deadbeat mom they hardly ever see. We have full custody of them as well as our birth daughter (14mos) together. I just found out that I'm not the beneficiary on my husbands life insurance policies but that my Mother-in-Law is. He said the reason for this is to save me from any grief that the girls mother may bring on when she catches wind of some money her girls are entitled to because she will blow it all on herself. He said he would be saving me major legal fees (brought on by birth mother by suing me for 2/3rds of the $) by placing the beneficiary in someone who is "further removed from me". In order to keep this family together in the event of my husbands demise, my MIL is prepared to give "blood money" to the birth mother to just "walk away" and not cause problems or make waves. The girls and my own daughter are so close and we are a tight family. My husband spoke to a lawyer to set all this up before we were married so my question is...

1) does it make sense that a lawyer advised to set up the beneficiary to the MIL?
2) Now that my husband and I are married, does it make sense to change the beneficiary to me since I hold the best interest of the girls?
3) Can this money be placed in bullet proof trusts now to prevent the birth mother from spending it all on herself?

Thanks in advance for your help.

 

[abstract99]

I have a life insurance plan that allots 33% to my wife as well as the rest split up over my 3 children. The plan was drafted up so that my children are the ONLY ones that can have the money as they will go into accounts that are only in my wife, mine and my children's name. They will have access to the account when they turn 18. I started the insurance plan AFTER I was completly legally divorced from my ex and since it is MY money that pays for the plan and I say that my kids get it then my ex does't. If in the event my kids want to give it to mom then that is their own thing.

 

[Ohiogal]

What is the name of your state? Illinois

I'm married to a man with 2 minor daughters (7-8yrs) from a deadbeat mom they hardly ever see. We have full custody of them as well as our birth daughter (14mos) together. I just found out that I'm not the beneficiary on my husbands life insurance policies but that my Mother-in-Law is. He said the reason for this is to save me from any grief that the girls mother may bring on when she catches wind of some money her girls are entitled to because she will blow it all on herself. He said he would be saving me major legal fees (brought on by birth mother by suing me for 2/3rds of the $) by placing the beneficiary in someone who is "further removed from me". In order to keep this family together in the event of my husbands demise, my MIL is prepared to give "blood money" to the birth mother to just "walk away" and not cause problems or make waves. The girls and my own daughter are so close and we are a tight family. My husband spoke to a lawyer to set all this up before we were married so my question is...

1) does it make sense that a lawyer advised to set up the beneficiary to the MIL?
2) Now that my husband and I are married, does it make sense to change the beneficiary to me since I hold the best interest of the girls?
3) Can this money be placed in bullet proof trusts now to prevent the birth mother from spending it all on herself?

Thanks in advance for your help.

Quite frankly what is in the divorce decree? Does he have to provide mom with any money to cover child support until the children turn 18? Some decrees require that. You do not legally hold the best interest of the girls when you are legally a stranger to them. The money could be placed in trusts.

 

[LdiJ]

The other answers were good...however I will also add that if your husband names you as his beneficiary, his ex-wife cannot gain access to any of the money. There is absolutely no benefit in naming his mother.

In my opinion, a much better plan would be to open relatively small life insurance policies with his children as beneficiaries.

 

[nextwife]

And, Hon, there's no reason YOU can't buy yourself a policy of insurance against his life for your own protection. I don't depend solely on the policies HE has bought. I bought a couple policies on him myself. That way, I can also make sure the policies never lapse.

That way, if he gets odd and alzheimerish someday, he couldn't change the benficiary! Not to mention that this way, I'm not taking away anything from hubby's (now adult) kids.

 

[CJane]

Ummmm.... just a minor thing. I've been told by multiple attornies and financial advisors that it is a BAD idea to name minors as beneficiaries of insurance policies. It has always been explained to me that the beneficiary should be an adult that you trust to administer the funds as if they'd been left to your children. Something about minors having no power to collect the money from probate, maybe? It's been awhile.

 

[Ohiogal]

Ummmm.... just a minor thing. I've been told by multiple attornies and financial advisors that it is a BAD idea to name minors as beneficiaries of insurance policies. It has always been explained to me that the beneficiary should be an adult that you trust to administer the funds as if they'd been left to your children. Something about minors having no power to collect the money from probate, maybe? It's been awhile.

Insurance companies cannot pay minors hence the money sits until they turn 18 and then it is turned over to them> Depending on the amount 18 year old is NOT usually mature enough to handle a great deal of money hence it is a better idea to leave the insurance to a trust naming the children as beneficiaries and setting the age of payment on the trust to 25 or whatever age the parent feels is mature enough.

 

[CJane]

Insurance companies cannot pay minors hence the money sits until they turn 18 and then it is turned over to them> Depending on the amount 18 year old is NOT usually mature enough to handle a great deal of money hence it is a better idea to leave the insurance to a trust naming the children as beneficiaries and setting the age of payment on the trust to 25 or whatever age the parent feels is mature enough.

I see. I knew there was something that prevented them from collecting.

 

[LdiJ]

Insurance companies cannot pay minors hence the money sits until they turn 18 and then it is turned over to them> Depending on the amount 18 year old is NOT usually mature enough to handle a great deal of money hence it is a better idea to leave the insurance to a trust naming the children as beneficiaries and setting the age of payment on the trust to 25 or whatever age the parent feels is mature enough.

As far as I know that isn't correct....although I can't say that Ohio might have different laws. In Indiana for certain the money is turned over to the child's legal guardian if a trust has not been established.

My dad owned an insurance agency for 40 years. He NEVER advised a client to name an adult as a beneficiary with the hope that the adult would do the right thing and spend the money on the children. Legally, the adult would have no obligation to do so, and people often react out of character when they have large sums of money suddenly available to them.

With him, it was ALWAYS name the child, or name a trust.

 

[ceara19]

2) Now that my husband and I are married, does it make sense to change the beneficiary to me since I hold the best interest of the girls?

You do realize that in the event of your husband's death you have no legal rights to the older girls right?

 

[nextwife]

As far as I know that isn't correct....although I can't say that Ohio might have different laws. In Indiana for certain the money is turned over to the child's legal guardian if a trust has not been established.

My dad owned an insurance agency for 40 years. He NEVER advised a client to name an adult as a beneficiary with the hope that the adult would do the right thing and spend the money on the children. Legally, the adult would have no obligation to do so, and people often react out of character when they have large sums of money suddenly available to them.

With him, it was ALWAYS name the child, or name a trust.

I agree. It's idiotic to name another adult! Let's say that adult dies a year or so after recieving the insurance proceeds - that money becomes part of that ADULT's estate!

My insurance money goes into a trust for my daughter, rather than her dad. NOT because I don't trust him to look out for kiddo, but because that keeps kiddos money from becoming part of hubby's estate if HE dies. That way MY insurance proceeds go to my kid, and not into hubby's estate and thus partially to his adult kids. It also protects the proceeds if hubby should ever need long term care-the state cannot go after kiddos money if hubby ends up in a nursing home long term for any reason.

 

[souptonuts]

My husband and I have FULL custody...

Quite frankly what is in the divorce decree? Does he have to provide mom with any money to cover child support until the children turn 18? Some decrees require that. You do not legally hold the best interest of the girls when you are legally a stranger to them. The money could be placed in trusts.

There was no divorce... my husband and birth mother were never married. Birthmom took off to live a life of drugs after 2nd kid was born. Enter me... stepmon, wife and mother. Mom has not paid us one red cent in child support because they never went to court. Fine.
Legally, you are correct that I hold no binds to my step daughters even though I have been with them and mothered them since they were 2 and 3 now 7-8. I certainly hold the best interst in those girls emotionally. The money could be placed in trusts but could birth mother unlock the trusts? Is there a way to bullet proof until they are 18 so BM can't get her drug hands on them?

 

[weenor]

There was no divorce... my husband and birth mother were never married. Birthmom took off to live a life of drugs after 2nd kid was born. Enter me... stepmon, wife and mother. Mom has not paid us one red cent in child support because they never went to court. Fine.
Legally, you are correct that I hold no binds to my step daughters even though I have been with them and mothered them since they were 2 and 3 now 7-8. I certainly hold the best interst in those girls emotionally. The money could be placed in trusts but could birth mother unlock the trusts? Is there a way to bullet proof until they are 18 so BM can't get her drug hands on them?

Unless you adopted the children you have no legal rights. Quitely frankly if hubby did not establish parternity, he technically has no legal rights, but I doubt that would ever be an issue with this biomom.

No a trust cannot be "unlocked" by the biomom. Once a trust is named and set up, it becomes the beneficiary of the policy proceeds payable according to the terms of the trust. Most banks have trust departments that can act as the trustee for a fee.

Note: with hubby's demise, if biomom pushed the point she gets the kids and any money paid from the trust if the children are minors. Once the children are adults, biomom is certainly free to scam them for the money.

 

[souptonuts]

Unless you adopted the children you have no legal rights. Quitely frankly if hubby did not establish parternity, he technically has no legal rights, but I doubt that would ever be an issue with this biomom.

No a trust cannot be "unlocked" by the biomom. Once a trust is named and set up, it becomes the beneficiary of the policy proceeds payable according to the terms of the trust. Most banks have trust departments that can act as the trustee for a fee.

Note: with hubby's demise, if biomom pushed the point she gets the kids and any money paid from the trust if the children are minors. Once the children are adults, biomom is certainly free to scam them for the money.

Thank you! Thank you! I think once the kids are adults they will have figured out that they got the unfortunate bad end of the stick when it came to their BM.

 

[BRN2005]

Souptonuts

Maybe and maybe not. You might be amazed. Often you will find that blood runs thicker than water. My sons had little or no contact with Father throughout the years (from the ages of 6 month and 3 years). They saw him on average of a maybe a week per year and spoke to him seldom, also he paid no child support and bought them no Christmas or birthday presents. However, they loved him and were devastated when he passed away (they were then 16 and 18). Although the girls' BM may not be much of a Mother, I would not assume that they are safe from her intervention or persuasion. I agree with previous poster (I also was an insurance agent for 15 years), you should make sure the money is safely in a trust for the girls' benefits and the the trust clearly defines how and when the money is to be disbursed. I also believe that 18 is too young for most young people to be ready for the responsibility of large sums of money. You can also set it up to where they get so much per year or so much at different set intervals (ie maybe X amount at age 18, X amount at age 21, X amount at age 25 and so on).