Contingencies for Beneficiary Designation

[Ann H]

I'm an agent and I should know this answer, so I'm embarrassed to ask... But I hate life insurance (sorry), and I must admit I don't know the answer.

I have 4 kids and also take care of my mentally retarded sister. I want my primary beneficiary to be my husband. I want my contingent beneficiary to be my 4 kids and my sister (equally) if my husband predeceases me. So far I can handle that!

So, the primary is for My Dear Husband - 100%
The Secondary is for Kid #1, Kid #2, Kid #3, Kid #4, My Sister - equally

Here's the problem with the secondary beneficiary. My sister has no spouse or kids and likely won't ever have any. If she predeceases me or dies concurrently with me, I want her portion divided amongst my 4 kids (who are named right along with her as the secondary beneficiary). I don't want her portion to go to her estate which would mean it would then be distributed to our siblings. How do I word that?

 

[BNTRS]

You might want to do some follow up with this just to make sure the insurance company understands, but naming the secondary beneficiaries per capita should accomplish this (for now).

Generally this applies to the generational level, but the State of NY told me it works on beneficiary levels as well. Per capita in this case means the benefit will be distributed only to next level beneficiaries if none of the higher level beneficiaries are alive.

Now this may make for trouble once your children have children, but until then this should work.

 

[Tahoe Ray]

You might want to do some follow up with this just to make sure the insurance company understands, but naming the secondary beneficiaries per capita should accomplish this (for now).

Generally this applies to the generational level, but the State of NY told me it works on beneficiary levels as well. Per capita in this case means the benefit will be distributed only to next level beneficiaries if none of the higher level beneficiaries are alive.

Now this may make for trouble once your children have children, but until then this should work.

A trust would likely take care of your issue but will cost some $$$. As BNTRS suggests, I would speak with your carrier and I would be interested to hear if they will let you designate your sister as per capita and your children as per stirpes to eliminate having to update beneficiaries once you have grandchildren.

Please let us know.

 

[VolAgent]

Get a trust.

Does your sister receive any government assistance? Is she legally competent to make decisions on her behalf? In either case, the money may not end up where you want if you leave it to her outright.

Also, a trust will serve to protect the money should your children decide to behave poorly. It will both be protected from them or anyone who decides to go after it due to their behavior.

A trust could end up being some very cheap peace of mind.

 

[Cornelius]

You might want to also consider if your sister gets a chunk of money if it my effect any potential Gov. benefits..

 

[bluemarlin08]

You might want to speak with an estate attorney. You will probably want to have, if you don't already have, a special needs trust for your sisiter, very common plan for handicapped adults.

 

[Ann H]

You guys are the greatest. Thanks for your answers. I think I'll contact the attorney because I don't want to mess this up. My sister gets some government benefits including Social Security Disability Income, but since I already support her she's not qualified for low-income assistance like SSI or Medicaid anyway. Since I never know what the future holds, it will be best for me to let an attorney set up the trust, I think. Thanks again for the advice! Ann H.