Pass the Life Insurance, Please!
Sometimes people cannot handle large sums of money, and parents may not want their children to receive large amounts of inheritance in a lump sum. Life insurance proceeds can be directed to a trust and kept there until children reach a specific age or until behavioral requirements are met prior to receiving an inheritance. Or a trust can dictate how much money can be distributed and how often.
You Don’t Need a Trust to Structure Payouts
You don’t need to have a trust set up — though it has some advantages. You can use beneficiary assignment to accomplish similar results. You can directly assign smaller amounts of benefits to those who may not be as good with money, or spread your benefit out so each person receives a more reasonable benefit.
Beneficiary Assignment Tips
Ways a Death Benefit Can Be Paid Out
There are a variety of ways a death benefit can be paid out to a beneficiary:
- Lump sum — the full amount paid at once
- Held in an account earning interest — the insurer holds the funds while they earn interest
- Period certain annuity payments — paid in installments over a set number of years
- Life income annuity payments — paid for the beneficiary’s lifetime
- Full or partial survivor annuity — as a period certain or lifetime income option
The Power of Choice
Talk to your insurance agent or estate attorney about the payout options available through your specific policy. And remember — the first step is simply getting covered.
