How difficult will it be to name children of as beneficiaries on my life insurance policy if they live in another state?

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How difficult will it be to name children of as beneficiaries on my life insurance policy if they live in another state?

I live in NC; the children reside in MO. Both of the parents are dead. I grew up with the father and have known the mother for the last several years of her life. The kids are ages 4 and 5 and I’m in contact with their guardian (maternal grandma). I want to name them as beneficiaries but I’m unsure of how difficult it will be since we’re in different states and unrelated. Do I just need the consent of their legal guardian or is it like in movies where someone dies then everyone is surprised they’re receiving money?

Asked on January 4, 2011 under Insurance Law, North Carolina

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

First of all, you are to be congratulated for your concern and generousity as to these children. 

The fact is that an out-of-state scenario should present no problem; however naming minor children as beneficiaries can.  A life insurance company will not pay a benefit to someone under the age of 18 and instead will hold the money (with interest) or pay it to a court-appointed guardian.  When minor children are involved, the best way to handle such a situation is to set up a trust to receive the life insurance proceeds. The advantage is that you (as the insured) establishes the trust, selects the trustee, and establishes the terms under which assets can be used and distributed from the trust. In this way, the life insurance proceeds can be used in the manner specifically selected by you.

At this point, consult directly with an estate planing attorney in your area; they can best advise how to set up such a trust.


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