Blended Families – Protecting Them
Blended families are the new normal, but what happens to your estate when you die?
If you have a blended family – children from a previous relationship then you may want to own the policy on your own life, you will then need to have an up to date Will to reflect your wishes.
If the policy is to allow your spouse to clear the mortgage and raise your family, then you may consider jointly owning the policy.
Let us take a step back. Consider why you take out life insurance? It is to protect your loved ones in the event of your death?
Having Life insurance can provide financial protection with a lump sum payment on your death that your spouse may use for; paying for children’s education, settling the mortgage or debt, and or may provide an source of funds to assist with the loss of your income, which your family were dependent on especially if you are the main income earner.
It is when taking out insurance, or when reviewing your policy that you consider the policy ownership.
Points to Consider;
Who should own your policy so that the money paid out ends up where you want it to?Do you fully understand how policy ownership works and the consequences of not having the right structure?
What does it mean to you?
As a policy owner, has the right to deal with the policy – changing the level of cover and contact details.Being a policy owner means you are also responsible for paying the premiums.
There are a few ways to set up the ownership of your policy. They each have their respective advantages and disadvantages:
As a Sole policy owner – You are the life assured and the policy owner. In the event of your death the policy will be paid to your estate and distributed in accordance with your will.
This could mean delays if your family needs to access the money to pay for daily expenses or funeral costs as the policy will be locked up in probate after death. This could take some a few months in complex situations to be released.
A Joint policy owner – An example would be a married/de-factor/couple they will jointly own each other’s policies.
During the life of the policy any changes that are made will require signed authorization from both owners and in the event of death, the funds go directly to the remaining policy owner.
This type of ownership however might create problems when a marriage or partnership breaks up, as both parties will need to agree to split the policy. (Something to bear in mind is to ensure you consider your insurance policy when there is a split and get this sorted before finalizing the split.)
Something a little different is a Policy managed by a trust – You can decide to have your policy managed by a trustee of a trust, as trusts themselves can’t own policies. With this option, it is important to have the right beneficiaries set up in the trust. To make sure funds reach children, it is best to make sure the will is up to date and specifies where the funds should go.
It is important to get advice from professional advisers like lawyers, accountants and financial advisers so that you have the peace of mind of knowing that your loved ones will be looked after should you pass away.
We can help you to get the ownership structure right. We’re experts at helping people navigate these complex decisions.
Get in touch today! 022 108 981