Whether you’re wanting to plan for a possible long-term death, or if you think that something terrible might happen to you, or if you are just extremely paranoid, having a life insurance policy to ensure that the ones that you love most will not suffer too greatly from your death is reassuring. Whether it be taking care of the kids, ensuring the spouse has a steady source of income for a while, or even just making sure your close relatives can be peaceful, having life insurance can be extremely nice.
But, sometimes the beneficiaries of the policy are not exactly human. For some, instead of the benefits and money going directly to the family, it can go into the financial world. This is mostly done for those that feel that they are in danger of being put into massive debts even after death, and would like some reassurance that it will not affect those around them.
This can be done for a number of reasons. The first is that the policy holder may be a bit unsure if giving the lump sum all at once is the right way to go. This is more about human greed and habits, as if a beneficiary were to randomly come into a large amount of money all at once, they may spend it all, instead of using it wisely as intended.
In these situations, the policyholder may wish to put all the money into a financial payout. Instead of it being given out as one lump sum, it is spread out over a number of months or years. For instance, if you had a payout of 1 million dollars on your life insurance, but are worried about suddenly granting your family 1 million, tax-free, you could, instead, spread it out over 10 years, with each year the family receiving 100,000 dollars instead.
Another way many people will make it work is to put it into a trust fund, and then add it into their will. A trust fund is just a safekeeping way of making sure no one is able to touch the money until a certain period. Even upon the insured member’s death, the trust fund amount may not be paid out until many years later. This is usually seen when someone wishes to entrust the money to a child, or grandchild, and would rather see the child grow up frugally, instead of giving everything over as soon as possible.
There are many other ways that trusts can be used. The best way to get the most information about all of these styles of payouts is to talk with an entrusted estate planning agent, as well as an experienced attorney. Both can help you come up with the best plan to spread out the payout, and ensure that no one will go down the wrong path with it. They can also let you know if it is even worth it to place this kind of policy down in the first place, or if there is an easier way to get things done.
If you have a denied life insurance claim, our experienced life insurance attorneys will recover the full amount of the policy.