A divorced parent in excellent health wants to buy a life insurance policy on himself but he is concerned that the ex-wife cannot be trusted with money.

The goal is to help support the 6 year old child in event of premature death.

What are the options for naming a beneficiary of the life insurance policy?

1 Answer 1


Don't name a beneficiary

In the absence of a beneficiary the proceeds of the policy will be paid to your estate. They will then be distributed in accordance with your will. Your will should establish a testamentary trust for the child for which you will establish the terms (for example, the will can consider things like living and education expenses and when the trust will end and the child can access the money directly) and name the trustee(s) in the will (and how they get replaced if they die or refuse to continue as a trustee).

The trustee is legally obligated to manage the funds in accordance with whatever terms you wrote into the trust for the benefit of the child. This should be someone you trust to a) do the right thing and b) manage the money wisely. You should also make provision in the trust to pay the trustee for their services. Most governments have a public trustee who will do this stuff for a fee.

You will need both professional legal and accounting advice to do this properly. A good lawyer should be able to "future proof" the will by considering that you might marry in the future and/or have other children (or that the first (or any other) child may predecease you) and writing it to deal with those eventualities.

  • 1
    Naming a beneficiary may be useful for tax purposes; sometimes very useful. In many places, because the insurance pays directly to the beneficiary, no inheritance tax will be paid.
    – gnasher729
    Commented Sep 5, 2016 at 8:11
  • @gnasher729 yes, but I live in a place with no death duties - hence the need for specialist advice
    – Dale M
    Commented Sep 5, 2016 at 11:18
  • @gnasher729 How do I name the 6 year old as a beneficiary but with a trustee?
    – user3270
    Commented Sep 5, 2016 at 13:29
  • One advantage of naming a beneficiary is that the payout is faster. (That is my guess. I have no real information on this.)
    – user3270
    Commented Sep 5, 2016 at 13:29
  • @user3270: Depends. In the UK you get a form where you enter the name of a trustee plus some other details, and who the trustee should give the money to and when. Or how the money should be divided if there is more than one.
    – gnasher729
    Commented Sep 5, 2016 at 15:23

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