Safeguarding Your Children’s Future with Life Insurance

Understanding the Role of Life Insurance in Child Protection Planning

As a parent, the protection and well-being of your children are paramount. Despite life’s uncertainties, you can ensure your children’s financial security with careful planning. Life insurance can play a vital role in this, providing peace of mind in the event of an untimely death. At Goldberg & Goldberg, we guide parents through the critical considerations when thinking about life insurance as part of their estate planning.

Determining the Necessity and Amount of Life Insurance

First, we advise our clients to review all potential sources of income that would benefit their children should the worst occur. These might include:

  • Your estate’s assets
  • Government benefits like Social Security survivor payments
  • Contributions from extended family

Substantial personal wealth or the presence of generous relatives may reduce or negate the need for life insurance. Conversely, most households balancing day-to-day expenses may need to prioritize ensuring their current financial obligations are met before considering adding life insurance premiums to their budgets.

Selecting the Appropriate Life Insurance Policy

With a range of life insurance products available, it is crucial to choose one that aligns with your family’s needs. Costly cash value policies such as whole life or variable life may not be the most practical option, especially given their savings/investment component which does little to secure immediate coverage for your dependents.

Goldberg & Goldberg often recommends term life insurance to our clients who are young and healthy. This type of policy is economical, poses a low risk to insurers, and provides the essential coverage that can offer your children financial stability without straining your present finances.

Ensuring Your Children Receive Proceeds Responsibly

When it comes to the management of life insurance proceeds, proper legal strategies must be utilized to prevent court-appointed guardianship, which can result in unnecessary legal fees and delays. Our firm can counsel you on several effective options to safeguard your children’s inheritance:

  • Naming a reliable adult as the policy beneficiary with the understanding that they will utilize the funds in the best interest of your children
  • Using a custodian under your state’s Uniform Transfers to Minors Act to oversee the policy’s benefits while clearly indicating how the proceeds should be divided among multiple children
  • Designating your living trust as the beneficiary, with detailed instructions in the trust document on managing the proceeds for the benefit of your minor children

Choosing Between UTMA Custodianship and a Child’s Trust

Goldberg & Goldberg can help you navigate the distinctions between UTMA custodianships and child’s trusts, including:

  • The age at which children can access the funds
  • Filing requirements and tax implications for both methods
  • The practical considerations in managing the inherited properties

Typically, if the life insurance proceeds fall below $100,000, a UTMA custodianship is the straightforward choice. However, for larger amounts or if you are concerned about the child’s financial maturity beyond UTMA age limits, a child’s trust may be a prudent alternative.

Taking the Next Step Toward Financial Security

To further explore life insurance or to establish a robust plan to protect your children’s future, Goldberg & Goldberg is ready to extend a helping hand. We offer a free consultation to discuss your estate planning needs and to find the right solutions for your family. For a future that secures your family’s financial wellbeing, contact us at (301) 654-5757 — where peace of mind is just a conversation away.

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