The possible early or unexpected death of a spouse or life partner is never an easy topic. However, it needs to be discussed due to the many families that have this happen and suffer greatly financially. Secure you family’s financial future with life insurance.
Many individuals understand the costs associated with a funeral but do you ever stop to think that the utility bills, mortgage, car payment or rent won’t pause although your life has suffered the tragedy of a death.
Following the death of a loved one, ideally there should be a transition period to grieve. Life insurance would allow your family to transition without having to worry about mounting bills or losing the house.
In the life insurance industry this transition period is researched and experts agree that there is a timeframe people go through when they lose financial support they were accustomed to having before.
Therefore, life insurance experts recommend the following coverage amounts:
- For those who are a breadwinner: 10 to 15 times an annual income
- Earn supplemental income for a household: 10 to 15 times an annual income
- Have a mortgage: 10 to 15 times an annual income
- Have children or dependents who are not financially self-sufficient: 10 to 15 times an annual income
- Home caregivers / stay-at-home mothers: $300,000
- For final expenses / burial coverage: $10,000 to $25,000
- For children up to age 18: Up to $25,000 is suggested
Life insurance allows the transition for financial adjustment and a beneficiary receives the death benefit free of income tax, to do with what they wish. Life Happens, a nonprofit organization committed to “assisting people to fiscally be responsible through the ownership of life insurance and related products”, offers a free life insurance needs calculator here.
Experts suggest that you do not name anyone under the age of 18 as a beneficiary. This is because the state will not allow a death benefit over the amount of $20,000 to be relinquished to their responsibility. The and the guardianship of the minor will be up to the court and a guardian ad litem will and the funds will be placed in probate court.
Illinois.gov explains that, ” A guardian ad litem is only required prior to a hearing on the ward’s competence, although a guardian ad litem or next friend may be appointed to represent the ward’s best interests in subsequent litigation.”
Then, the state will appoint a financial guardian who will also be deemed the “person guardian” who cares for the minor.
Probate judges will take into account any “testimony from all interested persons, sometimes including the minor if they are over a specific age, usually 12 or 13.”
If the death benefit is an amount $20,000 or less, the state law may allow to hear petitions from “interested” adults to petition the funds be placed in an account under the state’s Uniform Transfers to Minors Act or Uniform Gifts to Minors Act (UTMA and UGMA, respectively). Also, the funds may be petitioned to go into a 529 account for college tuition dispursement down the road. The account will hold the funds for the child until they reach the age of majority, which is 18 in most states, but sometimes 21.
If the death benefits are over the $20,000 the state’s probate court will appoint the conservator on behalf of the minor. The money is to be used at the conservator’s discretion. They are not held to the same fiscal responsibilities as trustees.
If the death benefit an amount more than $20,000 and cannot be placed into a UTMA, UGMA or 529 account, a person is established as conser
e that if the death benefit is more than can be placed in a UTMA, UGMA, or 529 account, “an amount that can be placed in an , ” that probate judges will take into account the “until the minor is 18 (in most states) and the state will determine who the next of kin is to receive the money. It is suggested you set up a trust to secure the funds go directly to your children for their needs.
A trust is a legal arrangement where you name a trustee who is transferred the death benefit and will dispurse funds according to the wishes of the trustor (the person who created the trust) and accounts in a ledger every transaction from the funds. Experts agree that parents name the trust as beneficiary for life insurance, when the death benefit is to support those under the age of 25. A trust would then relinquish the funds to the children when they become of “contingency age” which is typically 18 to 25.
In a probate situation in which the death benefits are held due to a beneficiary under the age of would hold the funds applications if death benefits are to go to children under the age of 25.
the if you wish your death benefit to assuredly go to the care and support of your children.
A trust can be created by any financial institution, upon your death until the minor become of age.