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Life insurance for child support

Sometimes clients are advised by their family law attorneys to require the former spouse to maintain a life insurance policy to cover future child support payments in case the former spouse dies before the children reach majority age. This is a good idea especially if the children are very young. However, the supporting parent may not be so excited to do this if the policy is going to be paid to the custodial parent. What guarantee is there that the $1 million windfall is going to be used or invested wisely for the children’s benefit? This is where proper estate planning and the use of testamentary trusts come into play. Instead of making the policy payable to the custodial parent, the policy can be payable to a testamentary trust established for the children’s benefit after the parent’s death with a direction to the trustee to collect the policy proceeds and continue making child support payments according to the settlement agreement. That way the paying parent can name a trusted person to serve as trustee over the children’s property who will invest the money wisely, make the necessary distributions as well as any discretionary distributions, and if there is any money left over when the youngest child reaches 18, that money belongs to the children and not the other parent. If you find yourself facing a divorce and you have minor children to protect, no matter what side you are on, this is an important strategy to discuss with your family law attorney and your estate planning attorney.