Don’t Make This Life Insurance Mistake –  Glendale Wills & Trusts Attorney

Don’t Make This Life Insurance Mistake – Glendale Wills & Trusts Attorney

Hi everyone, my name is Armine Bazikyan from Bazikyan Law Group, I’m an attorney here in Los Angeles. Our
practice focuses on Estate Planning, so Wills and Trusts, for those of you not
familiar with the Estate Planning process. I want to tell you about a big
Life Insurance mistake that I see all the time, so don’t make this
Life Insurance mistake. What I see all the time is, people naming young children
as beneficiaries on Life Insurance. Most of the time it’s a parent, the parent will
name their husband or their wife as a primary beneficiary, and then they
will name their children as a secondary beneficiary. Sometimes we have
grandparents who name their children as beneficiaries and then they name a
grandchild that’s under the age of 18 as a backup beneficiary or sometimes even
an actual beneficiary of their Life Insurance. So in the Estate Planning
world, this is a big mistake for the minor child, because they are under the
age of 18. What ends up happening is, the Life Insurance company will not release
that money to the young child, instead they will ask for what’s called a
“Guardianship” to be set up through the court system. So they will ask the family
to go to court and get a judge to okay that they give the money to the Guardian.
A lot of times it is in an account that is kind of locked away and at 18, when
the child turns 18 and they are legally an adult, it gets handed over to them. So
we have situations where you know, an 18 year old inherits or receives $500,000
right when they turn 18 or $1,000,000. And it’s a very alarming number to get
in cash at the age of 18 and a lot of times it will derail a child from their
life goals. Especially because at that point the parents don’t have control
over the account. So the guardianship process, when it goes through probate is
extremely expensive. We don’t want to go through that process just to transfer
the money from the Life Insurance company for the benefit of the child. So
this is a big mistake that we see. Instead what should be done
is, that instead of naming that child directly, you should create a Trust for
them, and name their Trust. And so a parent that already has an existing
Trust for example, can actually just name the Trust as a beneficiary for their
child and then make provisions in that Trust. So I’ll give you an example, let’s
say John and Sally are married, they have two young kids, and they buy a Life
Insurance Policy. They name each other as beneficiary and then instead of naming
their children, they name “the John and Sally Trust” as a beneficiary of the
Life Insurance Policy. So if they’re both gone, that money will
actually come into the Trust and then they have already decided who’s going to
be in charge of the Trust within that document. They’ve already decided how the
kids will use the money and when they will use it, at what age. So they can
restrict whatever they would want that money to be used for and they can have
more control over that amount for the kids. So it doesn’t necessarily have to
be given to them at 18, they can push back that age to like 30 or 35 or
whatever it is that they want. So it’s very important. It’s a really, really
simple and easy fix to a very big problem. And I see it most often with
grandparents leaving a surprise Life Insurance Policy for a young child.
And it actually puts the parents in a very stressful situation where, they’re
now they’re just like in the court system navigating trying to figure out
how to get this cash and they’re limited in how they can use it for the child. So
it’s a very big problem and there’s always a very small, simple solution that
we can help you with. So feel free to contact our office, we provide free
consultations. I can sit down with you and help you plan a very straightforward
solution to solve this very big problem. For us it’s simple, for others it may be
complex, but we can sit down and put together a plan that will make sure we
take everyone’s hands out of your kids money pot. We can eliminate the need for
a judge’s involvement, eliminate the need for the courts involvement, and we can
keep everything private amongst yourselves. So feel free to call our
office and schedule a consultation.

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