How to divide life insurance among 3 beneficiaries...?

Question

My husband has one child from a previous marriage and then me listed as beneficiaries 50/50 on his life insurance.

We had a baby last year and I am confused as to whether it would be better to leave it as is and add that if I die before my husband the money goes to our son, OR should I have my husband divide it equally among the three of us?

My husband says I would need the money to pay off the house if he died... He said that he does not want his first child to get less to divide it three ways would be ripping his child off.

I am concerned that our child is being lost in the process here; it just doesn't sound right. But I am unfamiliar with how these things work.

I am not trying to shaft his child from his previous marriage. I am just trying to look out for our child as well.

Please help. Thanks.

Answer 1

depending on the age of your husbands first child you can appoint a trustee to the monies if anything happens, you can also add a clause for your portion to go to your child together.  It's always a love/hate battle when you have to make plans for the 'what ifs', good luck.

Answer 2

OK, first of all, it's a BAD idea to leave money to a minor child - that means their legal guardian pretty much has free access to the money, to do whatever they want with it.

What you're talking about, is making YOUR child a CONTINGENT beneficiary, if you die.   Which you could do.

OR, he could set up his will to make a trust upon his death, and the money can go to fund the trust, and the trustee (someone he trusts) can pay as needed for the minor children.

Answer 3

You're his wife, if you are trustworthy, you should get every dime. You should also take care of the other child with it.  that's my take.

Answer 4

I think it is fair to divide it among the three of you equally.  If we change he scenario a bit, and have the first child be your  son/daughter would you feel that you are being over looked? Funds from a life policy are supposed to help those left behind, and if you think that the current policy is not enough money, increase the face value.

Answer 5

If your/his main concern is the children, then have him change the policy to 50% to his first child and 50% to the child that you and he have together.  If he were to die before the children are 18, there will need to be a trustee or executor of the funds for each of the children.  You could then be the trustee or executor of your child's part and the mother of his first child would be that child's.  Doing it this way seems to exclude you in a way, and if that will be a problem, you will need to discuss maybe getting a policy that seems to be enough to take care of the three of you should something happen to him.  Or you could have the first policy at 50/50 for the children and then maybe purchase a separate policy for an amount that is specifically for you.  I understand this is a difficult situation, and financial matters are rarely easy to discuss.  The bottom line is that you need to feel like you could still support yourself and your child if disaster struck.  No one needs to get "ripped off" or "shafted".  The two of you need to sit down and go over all your household expenses and financial obligations, whether or not you would be going back to work, how much it costs to raise a child to 18, college tuition, etc. and make decisions based on the entire family, which means you, your child and his first child.  Until you feel comfortable about the decision, this issue will re-present itself later and possibly cause undue stress on your marriage if it causes arguments.  Get it straightened out now and give yourself some peace of mind regarding the future.