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Naming a Guardian as Beneficiary

Posted 7 years 3 days ago ago by Danielle Streed

When I deal with young couples, many of them believe that they should name their guardian or conservator of their minor children as the contingent beneficiary on a life insurance policy or a retirement account.  The thought process is simple: “ If this person is going to take care of my minor children should I die, they should receive the needed funds to care for my children.”  The problem is that when you name the actual guardian or conservator as the beneficiary of these accounts, you are in essence saying “These monies are yours when I am gone.”  The guardian/conservator legally owns all of the life insurance benefits or the IRA benefits.  They have no legal responsibility to use those benefits for the minor children.  It is better to actually name your minor children as the beneficiary or make your estate the beneficiary.  The proceeds from these investments or assets would then be handled through the probate court.  The guardian/conservator will be put in charge of managing these funds for your minor children, but they will not be considered or viewed as the owner of these funds.  Because your choice of  a guardian or conservator can change over the years, it actually simplifies your process by naming your estate as the beneficiary.  That way, should you change the guardian or conservator in your will, you are not constantly needing to update your beneficiary designations.  The alternative to naming your estate or your minor children as the beneficiary is to consider setting up a Living Trust.  A Living Trust is a way for you to hold funds after your death, in trust, for the benefit of your children, but also control the age of distribution.  If the assets pass through the probate court process under the terms of a Last Will and Testament, the court does not control the distribution of those funds if your children have attained the age of 18.  With a Trust, you can control the age or ages at which your children receive lump sums of money and handle the money issues before they reach a designated age.

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