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5 Life Insurance Mistakes That Can Hurt Your Family

Life insurance is an important part of estate planning and taking care of the people you love after you pass away. Make sure you don’t make these mistakes.

1. Failing to name a beneficiary

Too many people forget to name a beneficiary or backup beneficiaries. Those mistakes can result in your life insurance proceeds having to go through the probate court process. That can tie up your money for months and even open up the life insurance proceeds to your creditors. And that can wipe out your funds.

2. Failing to keep beneficiaries updated

Too many people forget to update their beneficiary designations.  You should review your beneficiary designations at least once a year so that you can make sure you update them upon events like divorce, deaths, and births.

3. Naming a minor as beneficiary

We see this ALOT. And it can result in expensive and time consuming complications for your family. That is because in Florida, minor children can’t directly inherit assets over $15,000. If a minor is listed as the beneficiary, the proceeds of your insurance will be distributed to a court-appointed custodian (guardian of the property), who will be in charge of managing the funds (often for a fee) until the age of majority, at which point all benefits are distributed to the beneficiary outright.

This is true even if the minor has a living parent! That child’s living parent would need to petition the court to be appointed custodian (guardian of the property).

Instead of naming a minor as beneficiary, consider setting up a trust to receive the insurance proceeds, and name a trustee to hold and distribute the funds to a minor child you would want to benefit from your insurance proceeds. By doing so, you get to choose not only who would manage your child’s money, but also how and when the funds are distributed and used.

4. Naming an individual with special  needs as beneficiary

If a loved one has special needs, chances are you want to help provide for a lifetime of care and protection. But if you leave the money directly to someone with special needs, it could disqualify that individual from receiving much-needed government benefits. Consider creating a “special needs trust” to receive the insurance proceeds. That way the money won’t go directly to the beneficiary upon your death, but it would be managed by the trustee you name and dispersed according to the trust’s terms, without affecting benefit eligibility.

5. Naming an individual as beneficiary to take care of that money for someone else

You might be tempted to list someone you know and trust as beneficiary of your life insurance, with the understanding that he or she would use that money to take care of another person that you have in mind. This could result in a number of problems. For example, you list your sister as beneficiary of your life insurance so that she can take care of your daughter. There is a difference between a legal obligation and a moral obligation. Morally your sister should use that money to take care of your daughter, but legally, it would be your sister’s money. Moreover, what if your sister passes away after she receives the life insurance proceeds? Then that money would be lost to your sister’s estate and your wishes may never be carried out. Or what if your sister had issues with creditors? Those life insurance proceeds could be at risk as soon as she commingles those funds with her own.

You owe it to your loved ones to get this right.

Naming life insurance beneficiaries might seem pretty straight forward. But if you mess this up, you can create pretty big problems for the people you love.  But don’t worry, we can support you in planning for the people you love, whether it’s through life insurance or other tools such as wills or trusts.  Schedule an estate Planning Session to get started.

This article is a service of  attorney Myrna Serrano Setty. Myrna doesn’t just draft documents she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer an estate Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call us  to schedule a Planning Session. Mention this article to learn how to get this valuable session at no charge.

Do Right By Your Pet. Be careful with your Will.

Are you a pet parent? Many people consider their pets as members of their family. So it’s only natural you’d want to make sure your pet is provided for in your estate plan, so when you die or if you become incapacitated, your beloved companion won’t end up in an animal shelter or worse.

However, under the law, pets are considered personal property. So you can’t just name them as a beneficiary in your will or trust. If you do name your pet as a beneficiary in your plan, whatever money you tried to leave to it would go to your residuary beneficiary (the individual who gets everything not specifically left to your other named beneficiaries), who would have no obligation to care for your pet.

Be careful when relying on a Will

Since you can’t name your pet as a beneficiary, you might consider leaving your pet and money for its care in your will to a trusted person who would be your pet’s new caregiver. But note that your pet’s new caregiver would not be legally obligated to use the funds properly,  even if you leave them detailed instructions for your pet’s care. In fact, your pet’s new owner could legally keep all of the money for themselves and drop off your beloved friend at the local shelter.

You’d like to think that you could trust someone to take care of your pet if you leave him or her money in your will to do so. But it’s impossible to predict what circumstances might arise in the future that could make adopting your pet impossible.

Also, a will is required to go through the court process known as probate, which can last for months, leaving your pet in limbo until probate is finalized. And remember that a will only goes into effect upon your death, so if you’re incapacitated by accident or illness, it would do nothing to protect your companion.

Pet trusts offer the ideal option

Consider a pet trust in a revocable living trust in order to be completely confident that your pet is properly taken care of and the money you leave for its care is used exactly as intended.

By creating a pet trust, in a revocable living trust, you can lay out detailed, legally binding rules for how your pet’s chosen caregiver can use the funds in the trust. And unlike a will, a pet trust does not go through probate, so it goes into effect immediately and works in cases of both your incapacity and death.

Also, a  pet trust allows you to name a trustee, who is legally bound to manage the trust’s funds and ensure your wishes for the animal’s care are carried out in the manner the trust spells out. And to provide a system of checks and balances to ensure your pet’s care, you might want to name someone other than the person you name as caregiver as trustee.

In this way, you’d have two people invested in the care of your pet and seeing that the money you leave for its care is used wisely.

Do right by your pet

To ensure your pet trust is properly created and contains all of the necessary elements, meet with Myrna Serrano Setty. With Myrna’s guidance and support, you’ll have peace of mind knowing that your beloved pet will receive the kind of love and care it deserves when you’re no longer around to offer it. Contact us today to get started.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she  ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why Myrna offers a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call us today at (813) 514-2946 to schedule a Planning Session. Mention this article to learn how to get this valuable session at no charge.

New Year’s Resolution: Tackle that estate plan!

It’s that time of year when many of us are working on our New Year’s resolutions. Whether it’s to eat healthier, get organized or finally clean out the garage, many of our resolutions center around some type of self-improvement. Doesn’t it feel great when you’ve finished that dreaded item on your to do list?

For many folks, estate planning is at the BOTTOM of the to do list. Studies have shown that over 50% of Americans don’t have a Will. Yet 100% of folks would benefit from some type of estate planning!  With an updated, effective estate plan, you can guard against unnecessary heartache, financial hardship and family drama. For example, if your health deteriorates to the point where you’re dying and you can’t communicate your wishes, without any advance medical directives in place, your loved ones have the emotional burden of trying to figure out what medical care you do or don’t want. Moreover, who’s going to be in charge of the decisions? And without an updated Will, can you be sure that your property goes to the right people?

I understand that for many of us, estate planning is uncomfortable, emotional and overwhelming. Who wants to spend time thinking about leaving their loved ones behind? I guide my clients through the process, one step at a time. Let’s tackle this resolution together. Then you can get back to your other resolutions, like cleaning out that garage.

Adulting is Hard. Are you the “family adult”?

In many families, there’s that one person who in times of crisis, rises to the occasion and takes charge. That’s the “family adult.” If you are the “family adult,” you already know it. Unfortunately, it’s a tough job that you didn’t apply for and can’t really quit. And what’s unfair is that things can get worse when it comes to aging relatives. As your relatives age, who do you think your family will turn to for help? You.

Without a well-designed estate plan, families are guaranteed to face emotional or financial crises that not even the “family adult” can fix. As the “family adult,” you can choose to feel resentful of the situation or you can plan ahead and encourage your relatives to create or update their estate plans. Not only will a well-designed estate plan make your life easier, it can help you prevent disasters. And in the event of a death or a medical crisis, you will have the necessary tools to handle the situation.

For example, if your aging parents become incapacitated and can’t handle their own financial matters, with a Durable Power of Attorney, you can help them. Estate planning also involves ensuring that there are enough funds available to pay for health care, rehabilitation or nursing home facilities. If you plan now, before a chronic or terminal illness strikes, you can secure tools like life insurance policies with benefits access riders, which provide cash access for medical care or other expenses. Adulting is hard. With a well-designed estate plan, you will have the tools to do it right.

Give us a call today at (813) 514-2946 to learn about customized estate planning solutions for you and your family.