Life insurance question and Will Maker programs.

[Tap]

52yo unmarried retired military veteran who is also a federal employee. Has life insurance thru FEGLI (Federal option) plus related service benefits. 

Has 4 kids, one is 17, his bio-sister 27,  other 2 are legal adults with different moms..

Minor child is with an estranged wife, who lives hand to mouth, is living her 20s over. Drugs/Raves and is absolutely not a stable environment for the teen. (This is from 27yo daughter who has consistent conversations with her). Bio-mom gave dad sole custody of this now-teen and the sister (as very young kids) and dad raised both with a couple visits and phone calls, from bio-mom yearly. Mom lives 3 hours away and she has a relationship with teen in name only. Teen wants little/nothing to do with her. She is absolutely not an even semi-stable parent. 

Bio-sister is the most likely one to step in if dad passes. We all know raising a child doesn't stop at 18. Bio-sister identifies as his sister, but also mom because she helped raise him (10yr age diff) Bio-sister is very, very financially unstable (long story) and while she is the obvious choice for guardianship due to proximity and relationship, she really would struggle. She has been consistent in teenagers life and grew up together. She is single and has 3 kids herself: one with low functioning Autism, one lives full time with another grandparent. Also lives hand to mouth, but is trying to better herself.

If he passes away, will the bio-mom get control over the son's money since I assume the mom would get immediate custody? She is still the other legal parent aside from child support/divorce-custody. I am very concerned about this possibility because the child would never live with her, but she would get the money intended to care for him. The sister would likely move into his home and take over the role of parent. Still not great situation but more stable that the mom. Could the mom move into the home without it being willed to her,  just because he is there and his guardian? Don't think this could happen, but what could stop it in current housing (essentially squatting) climate? Or....would the money get held in probate until the minor and his actual guardian work out the details? Where does a minor go in this circumstances? The sister will absolutely need the money to manage the mortgage/expenses etc. Expenses are high in this home, and she works part time, in significant debt and has no car to get to her job (DUII). With life insurance, there would be enough to provide them to stay in this home for at least a couple of years. Plus vehicle etc. 

I want him to set up a trust, but he is reluctant because no good solution exists. I hate this! I am trying to help him see the really, really bad possibilities and if there is no good solution, to at least block the worst situation. I don't care if the teen goes to live with his mom and she uses the money to provide care for him. Go MOM! But I am very concerned the money will go to mom, but responsibility go to sister. 

 

The other kids will be handed money and they will likely never be heard from again. There is no relationship between sibs, outside of the two bio-sibs I mention. 

If he won't go a lawyer for this, I would at least like to use a will-maker and have him set a few wishes in place. If we use a will-maker program and file it with the state, will that be sufficient for this situation? Basic life insurance money  set aside for the person who actually cares for teen? Is that possible? Can a trust be set up with a will-maker program or does that require a lawyer to at least limit the distributions for a couple of years? I know lawyer is advised because there are many details that affect taxes, probate and all the details..... but is using a program better than nothing at all? Sister would have zero assets to hire a lawyer if she needed one until the insurance was divided, but then it could be too late. She would be forced to walk away and let mom take money. 

I try to tell him that if all assets have no beneficiaries listed. The  house and assets will be split 4 ways between the kids, and that will require the house to be sold and teen to go to mom. Sister can't house him, without dad's house, due to her own kids and 2 bedroom subsidized apartment. 

 

This person is having surgery next week and will be off work. I am hoping to have him address this issue since he will have time to make call, do the steps etc. I am in the process of redoing my documents and would like to encourage him as well. 

Do you have any talking points for me to use to nudge home.  We are talking about total assets of maybe $500,000 -700,000 (after debts settled). Not a huge amount split 4 ways, but bid enough to be concerned about. 

[City Mouse]

That sounds like a very complicated situation. 
 

I don’t have any idea how to convince a guy to do what needs to be done to take care of and protect his kids after his death. 

If he has a will, or doesn’t have a will, his estate will have to go through probate. That is not a quick process even with an uncomplicated estate. It is likely that the youngest child will be 18 by the time the estate is settled and any money inherited, so the mom couldn’t take the money unless the kid gives it to her. 

 

[Tap]

38 minutes ago, City Mouse said:

That sounds like a very complicated situation. 
 

I don’t have any idea how to convince a guy to do what needs to be done to take care of and protect his kids after his death. 

If he has a will, or doesn’t have a will, his estate will have to go through probate. That is not a quick process even with an uncomplicated estate. It is likely that the youngest child will be 18 by the time the estate is settled and any money inherited, so the mom couldn’t take the money unless the kid gives it to her. 

 

Oddly. That is reassuring lol

[Tree Frog]

40 minutes ago, City Mouse said:

If he has a will, or doesn’t have a will, his estate will have to go through probate

I think this might depend on the state he lives in. Different states have different laws. In my state, with a $400,000 estate and a will, the estate didn't have to go through probate.

@Tap, it might be worth finding an attorney who is familiar with the laws in your states and can speak to your concerns specifically. 

[prairiewindmomma]

A trust needs to meet the legal requirements for the state it is written in to be valid. Some will software is decent-ish, most isnt for creating trusts. If he doesnt think either adult should have access to the funds, he could always have a custodial manager take care of the account. His estate is on the small side of normal for that, but with the child reaching majority in the next year, it’d be a way to protect the funds.

I think there is more flexibility here than he is seeing, but I also agree it’s hard to make a man be responsible and do right by his kid by arranging his legal affairs. 
 

I’d push the custody lever (default is kid would go to biomom) and the tax lever. He wants to be able to shield funds from the tax man.

[Bootsie]

I have a relative to who was in a similar situation, but a much younger age.  An important thing is to make sure that the ex-wife is no longer listed as the beneficiary on the life insurance policy.  Is the youngest child now 17?  How long before this person turns 18?  IME, the court will let a 17-year old child have a significant say in where they live if a tragedy occurs.  

[prairiewindmomma]

The issue isnt where they live, it’s that it sounds like there’s potential for either household to poof minor’s funds either through wild living, or through trying to get out of hand to mouth living. Trying to claw back improperly spent funds sounds not likely.