Pretty much all parents want to make sure that their children are always taken care of, even after their deaths. However, when you have minor children, it is even more important to take the appropriate steps to ensure that your children have financial support. Here are a few things you can do to provide for your children after your death.
Purchase Life Insurance
Purchasing life insurance is one of the easiest ways to support your children after your death. Two types of life insurance are widely available: term life insurance and whole life insurance. The best option depends on your goals for the life insurance money.
Term life insurance is more affordable; each month or quarter, you pay a premium in exchange for a specific payout. The insurance policy is effective for the stated term. For example, if you purchase a 25-year policy when your child is 2, the policy does not expire until your child is 27 years of age.
Whole life insurance has higher costs than term life insurance, but it also functions as an investment. Premiums are higher than those for term life insurance, but the policy also accumulates a cash value. If you die, not only will your children receive the payout from the policy, but they will have access to the accumulated cash value as well.
Create a Trust for Your Child
Know that you should not make your minor children beneficiaries on your life insurance policies. If you do this, the court will have another individual manage the money until your children are legally adults. It is possible that the court may select an individual whose financial philosophy you do not agree with.
An alternative is to set up a trust in the name of your child and make the trust the beneficiary of your life insurance policies. When you set up the trust, you decide who will help manage the money inside of the trust. This is a simple way to make sure that someone with your financial views oversees your child's inheritance.
Another benefit of the trust is that you can control how and when money is disbursed. For example, if you want a portion of the money to go to your child's guardian to help with the costs of raising a child and the remainder to be saved for college expenses, a trust can help you accomplish this.
Let Your Loved Ones in on Your Wishes and Financial Information
Make sure that you tell trusted loves ones what steps you have taken to provide for your children financially after your death. Tell your loved ones where they can locate important documents, such as your will, trust documents, and documents for your life insurance policies. Let them know what your wishes are; to protect your children, it is best to inform multiple individuals about your estate planning.
For additional information, contact a company that offers financial services.