A father in Kendall bought a life insurance policy when his daughter was born and named her as the beneficiary. Twelve years later he dies unexpectedly. The policy pays, but a twelve-year-old cannot receive the money directly, so the family has to go to court to have a guardian of the property appointed, file reports and manage the funds under court supervision until she turns eighteen. At eighteen, the remaining money becomes hers outright. None of that was what he intended, and all of it was decided by a single line on a form he filled out in a few minutes.
Families spend time choosing the right policy and the right amount, and very little time on the part that decides where the money goes. The beneficiary designation controls who receives the proceeds, how quickly and under what conditions, and it overrides a will.
Primary and contingent beneficiaries
The primary beneficiary receives the proceeds. The contingent beneficiary receives them if the primary has died. A policy without a living beneficiary usually pays to the insured’s estate, which sends the money through probate, exposes it to the estate’s creditors and delays it for months. Naming contingent beneficiaries, and reviewing both after a death, divorce, marriage or birth, is the simplest protection there is.
Minor children
Insurance companies will not pay a large sum directly to a minor. In Florida, money left to a child without other arrangements may require a court-appointed guardianship, with the costs and oversight that come with it, and the child receives control at eighteen. Parents have better options. A trust can hold the money for the children and release it on the schedule the parent chooses, and a custodial arrangement under the Florida Uniform Transfers to Minors Act can work for smaller amounts. An estate planning attorney can recommend the right structure.
When a trust makes sense
A trust named as beneficiary lets the insured decide how the money is used: paying for education, supporting a surviving spouse, protecting an inheritance from a child’s future divorce or creditors, or providing for a child with special needs without disrupting government benefits. For larger estates, an irrevocable life insurance trust can own the policy so that the proceeds stay outside the taxable estate. Our article on life insurance and estate planning explains how that works for high-value families.
Divorce, remarriage and blended families
Life changes leave old designations in place unless someone updates them. A former spouse can remain the beneficiary years after a divorce, and a new spouse may receive everything while children from a first marriage receive nothing, or the reverse. Divorce settlements sometimes require one spouse to keep coverage for the other or for the children, and those requirements should be reflected on the policy itself. Blended families especially benefit from a clear plan, often using separate policies or a trust.
Ownership matters too
The owner of a policy controls it, can change the beneficiary and can cancel it. In most families the insured owns the policy, but business arrangements, divorce settlements and estate plans sometimes call for a different owner. Ownership also affects whether proceeds are included in the insured’s estate. It is worth confirming who owns each policy as well as who will receive the money.
Worth confirming on your policy
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That primary and contingent beneficiaries are named and current
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That minor children are not named directly without a trust or custodian
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That beneficiaries were reviewed after any marriage, divorce, birth or death
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That a trust, if you have one, is named correctly as beneficiary
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That divorce or business agreements requiring coverage are reflected on the policy
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That you know who owns each policy and why
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That your family knows where the policies are and how to file a claim
Talk to us
Prestige Insurance Group offers life insurance for business owners and families across Florida and reviews existing policies as well as new ones. Send us your current policies and beneficiary forms, and we will help you confirm the money will reach the people you intend, working alongside your attorney when a trust is involved.
Call the office nearest you. Se habla español.
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Miami: 305-969-8776
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Orlando: 407-993-2331
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Stuart: 772-247-3788
This article is general information, not legal, tax or financial advice. Policy features, underwriting and pricing vary by carrier and change over time; review estate, tax and business planning with your attorney or accountant. Prestige Insurance Group, Florida agency license L057894.
