Minor Beneficiaries.. Does Your Beneficiary Designation Really Reflect Your Wishes?
Many of us have minor children and grandchildren for whom we want to provide. Often we may include them as beneficiaries of our retirement plans, insurance plans and our wills and trusts.
For example, Joe and Sheila are young parents of two minor children, Dakota and Amanda. Joe and Sheila have good jobs and are putting money away in their retirement plans and have life insurance policies through their work. As is typical with many young parents, the beneficiaries of their retirement plans, life insurance policies and their wills are first to each other and then, if both are deceased, to their children. Many young parents don’t consider the consequences of those beneficiary designations if their children actually receive the monies while they are minors.
Assume Joe and Sheila are driving to see their parents in Miami and leave Dakota and Amanda with a babysitter. Tragically, Joe and Sheila die in a car accident. Sheila’s parents, who are handling their estate, determine that Dakota and Amanda are the beneficiaries of $200,000 of retirement benefits and $500,000 of life insurance and under Joe and Sheila’s wills, Dakota and Amanda will also receive the house and all other bank accounts.
Because Dakota and Amanda are minors, Section 744.301 of the Florida Statutes provides that, IF a natural parent is living, then the natural parent can receive assets for a minor child ONLY if the assets are less than $15,000. Thus, no guardianship is necessary. However, as both Joe and Sheila have died, regardless of the amount of monies, someone will have to establish a minor guardianship under Section 744.3021 of the Florida Statutes for Amanda and Dakota.
A better alternative for Sheila and Joe would have been to provide a trust as the recipient of the life insurance proceeds, retirement benefits, bank accounts, etc. Homestead is another issue which will be discussed in next week’s blog. They could have specified in their trust that monies would be be distributed to their children over their childrens’ lifetimes or at certain ages. However, IF retirement benefits are payable to a trust, the trust should be drafted as a “see through” trust (as discussed in a previous blog post).
ADVICE: ANY time minors are beneficiaries, you must consider the consequences and the amount of money the minors will receive. You also should anticipate a guardianship being necessary for the monies if there is no trust drafted to receive such funds. Even though you may think you do not have enough money to have an “estate plan”, the consequences of not planning could be more expensive that the planning.
New Term: Life Estate… I own a piece of real estate “life estate to Linda with remainder to Sally.” I have the use of the real property during my life. I can not sell or otherwise convey all of the real estate without Sally’s consent. My life estate has a value based on my life expectancy (IRS tables are usually used to value a life estate). Further, under Florida law a life estate owner has to pay for ordinary expenses such as the management or preservation of the property, which includes interest, ordinary repairs and regularly recurring taxes.
GENEROSITY IS A KEY TO HAPPINESS …REACH OUT AND HELP SOMEONE TODAY!