When a parent re-marries, it becomes more important than ever to protect life insurance proceeds designated for children. An occurrence that happens more frequently than might be expected is where the second wife changes the life insurance benefits to her name. If the re-married father and parent of children from a previous marriage dies, the second wife will receive all the benefits of the life insurance and none will go to help support the fathers biological children. When that wife dies, it is likely that the money will go to her biological children and the fathers children will again receive nothing. This was probably not what the father had in mind when he purchased the insurance and made the premium payments. Can anything be done to protect assets for descendants now? Absolutely.
How can you allow a portion of the money to be available for the benefit of a second or third wife and give part to your biological children? One way is through changes in the beneficiary designations. Although this can be difficult and some companies require the consent of the spouse, it is not impossible.
A better way, is to set up a revocable trust. The trust can designate who you would like to receive the proceeds and how you want the money distributed. Even better, once you create the trust, you can amend it.
It is best to create the trust before you get married, and amend it when you choose. Call for a free consultation if you think this situation applies to you.
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