I get basic free life insurance as a part of the benefits package from my employer. Recently, I checked it and was surprised to find out that my ex-wife (been divorced for 5 yrs) is still the beneficiary.

It's not a huge amount but enough to see my kids (10 and 14) till adulthood. I would rather not leave the money to my ex-wife because she will blow it on the next shiny thing that comes her way. I would also rather not name my mom as the beneficiary, because I think my ex-wife would just bully or guilt her out of the money.

So I am not sure how to proceed. I've heard of trust funds but I have no idea how they work or even if that is a thing.

So what are my options?

  • > Recently, I checked it and was surprised to find out that my ex-wife (been divorced for 5 yrs) is still the beneficiary. This is not at all an unusual occurrence, and there is no one to blame except yourself; it was your responsibility to inform HR and do the paperwork to change the beneficiary. What you need to figure out is who will be taking care of your children till they turn 18 if you die before then, and if so, will they be doing it out of the goodness of their hearts or will they need to get some money to feed, clothe, and house the children and to send them to summer camp etc. Feb 24, 2014 at 20:14

3 Answers 3


IANAL, nor am I a financial professional. However, I've just looked into this because of a relative's death, and I have minor children. I am in the US.

First, a named beneficiary on many accounts means that any proceeds are kept out of the estate and do not have to go through probate. That usually means that they're available much more quickly.

Second, a beneficiary statement trumps a will. The account may pay out long before a will is even filed with the probate court.

Third, you can name a trust as the beneficiary. In this case, because you want to make sure the money goes to your children, that's likely your best option.

  • +1 for trust, but free insurance may be low face value. A $10K policy may not be worth a $2000 cost of setting up a trust. YMMV on both accounts. Feb 25, 2014 at 20:49

As far as I know, you can have anybody be a beneficiary on life insurance while you are unmarried. Once you are married, you may or may not have to have your spouse sign off (I'm not sure if it's a state or federal law). People typically will have family, but it could just as easily be a waiter who gave you great service at a restaurant.

I would suggest you look into creating a will. Within that will, you can:

  1. State explicitly that neither your mother nor your ex-wife can receive the money
  2. Have a trust formed upon your death that will look after the children until a specific age (most likely 18)
  3. Give specific directions about the money, for instance, $x are set aside to buy a car at 17, $y are set aside for college, and $z balance is given upon completion of college. While having a set amount for each child.

This way, it should not matter as much who the guardian is, but rather who is in control of the trust. I would imagine as long as your children are minors, the state would put them under your ex's custody (if they aren't already).

Does that make sense?

  • In some places (the United States for example) if you are married the spouse has to sign paperwork for the the beneficiary to be somebody else. Feb 24, 2014 at 20:47
  • Yes, this is true. I think it was due to men having mistresses and having them as the beneficiary instead of the wife. I will edit the answer to reflect this.
    – Waddler
    Feb 24, 2014 at 22:15
  • @mhoran_psprep Do you have a reference to back up your claim that the spouse must sign paperwork in order to have the beneficiary be someone else? As far as I know, insurance companies want beneficiaries (other than charities) to have an "insurable interest" but don't give the spouse veto power. In any case, the issue is not relevant here since there is no spouse, only an ex-spouse. Feb 25, 2014 at 13:54
  • 2
    @mhoran_psprep are you sure its for insurance and not retirement accounts? Retirement accounts must go to the spouse (at least in community property states), but insurance - its a contract, you can do whatever you want.
    – littleadv
    Feb 25, 2014 at 19:59
  • 1
    What @littleadv said. My 401(k) required my spousal unit to approve that my daughter be first beneficiary, but insurance is at the owner's discretion. Feb 25, 2014 at 20:47

Any person, organization, trust, or charity can be the beneficiary. But if the beneficiary is a minor, they won't be able to access the money immediately depending on state law. In most states, it requires that a guardian be appointed to administer the proceeds payable to the minor child.

If a guardian is not already in place, your next of kin will have to undergo the time and expense of appointing a guardian.

It is best to leave it to a trusted relative or family member that is the designated guardian.

If that isn't a option. Consult a financial professional to see if a trust is a variable alternative. Trust is an entity that receives money and distributes money according to the rules set in the trust. Trust is a complicated matter and must be setup properly.

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