LIFE INSURANCE, ANNUITIES, IRAS

We buy life insurance for lots of reasons but mainly to replace property or income lost on the insured’s death – to take care of those we leave behind.  The policy names a beneficiary and contingent beneficiary.  Likewise, annuities and IRAs name a beneficiary and contingent beneficiary.  Upon proof of death, the company pays directly to the beneficiary.  If the beneficiary is a minor, the company will insist on a court-appointed conservator which is an additional expense and burden.  The assets are distributed in full at age 18 with no strings attached.

If those we leave behind are minors, it makes sense to have the named  beneficiary be a trust that can administer the funds and make sure our wishes are followed.  We all can appreciate the danger of letting large amounts of money get in the hands of an 18-year old.