Dave Says: Single Mom Needs Help With Estate Planning

Dear Dave,

I’m a single mom with a 13-year-old daughter. Recently, I visited a lawyer and drew up a will. He advised that I change the existing beneficiary of my life insurance policy from my daughter to my estate. What do you think? I was also wondering how taxes will affect this policy.
 

- Dawn

Dear Dawn,
If it were me, I’d set it up where the money goes into a trust for your daughter’s benefit.
A few years ago I set up a family trust. The beneficiary on my insurance policy is my wife, but if something should happen to both of us the money will go into the trust. From there, it’s the trustee’s job – according to the dictates of the trust – to manage the money for the benefit of our kids.

You probably won’t have any tax worries. There’s no income tax on life insurance beneficiary payments as long as the amount involved isn’t above the estate tax limit of $750,000.
 

- Dave