Legal Question in Wills and Trusts in Vermont

Re: How does one assign the beneficiary if proceeds of a life insurance policy a

Dear VT donor,

As an attorney and Certified Financial Planner, I should tell you that your intentions are fine, but your particular mode of execution is a disaster!

If you use the terms of your will as a conduit for transferring your estate of life insurance proceeds, you are subjecting a 'preferred' asset to unnecessary state and possibly federal taxes, admninistration costs, probates expenses, and also subject them the proceeds to attachment.

If you wish to accomplish a division of your assets efficiently, there are better ways. Every dollar passing through probate will be subject to fees and taxation. Normally, life insurance is received by a beneficiary directly and tax fee, but under your plan, it would lose this preferred status.

If you wish to accomplish your goals efficiently, you should consult a qualified estate/financial planner, or at least someone who understands the implications and costs of estate distribution methods. (a handful of financial planners and estate planning lawyers.)

Based on your zip code, you're not far from our office. Give me a call if you wish to discuss this further. Best regards, Michael

PS: A good planner will review your entire estate, all your property and title structure, and get your objectives. Then design a simple plan to best accomplish them with minimal cost and depletion.

Re: How does one assign the beneficiary if proceeds of a life insurance policy a

You simply write in the beneficiary designation: the estate of the insured.

This poses 1 1/2 potential problems.

The 1/2: in most states, insurance is free of the claims of your creditors. If it's payable to the estate, it could then be subject to their claims. Why 1/2? Because this is only relevant if your "normal" probate estate isn't enough to pay creditors. If it is, it won't make a difference.

In some states, fees are based on the size of the estate. By making the insurance payable to the estate, you increase the fees.

This is *highly* unlikely to generate taxes.

Simplicity may outweigh other concerns. Yet you may be better off to avoid this. You can get pretty complicated insurance beneficiary arrangements by the simple process of "see attached" (but the more complicated you're getting, the greater the need to run through an attorney) or you may find it easier to have the insurance (and perhaps the rest of your estate) payable to a simple trust.