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What is the best way for a non family member give money to my minor children from their dad's life insurance policy?

Lynchburg, OH |

My Ex husband passed away last year and he still had me listed as the beneficiary for his life insurance policies. However, Ohio is a revocation state so the policy goes to a friend of ours. What is the best way for this friend to transfer the money to me? I have 2 minor children and will be putting it aside for their college.

Attorney Answers 3

  1. It would help to know the amount involved. There would seem to be no problem with the friend simply gifting it to you. He/she can give $13,000 per year without even reporting it to the IRS. More than that, and a gift tax return would need to be filed. If you intend to simply invest it for the kids, I would have her gift you $13,000 per year and just invest it as she gives it to you. If there is a need for you to get the whole thing sooner, then she can gift it to you, report it to the IRS, and you are done.

    James Frederick

    *** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state.

  2. If your friend's goal is to make the proceeds available to your children, then she shoul consult with an estate planning attorney and have that person review the policy to see if a disclaimer would result in the transfer of the funds to your children. As Mr. Frederick notes, knowing how much money is at issue would be helpful and transfers to you/your children would be subject to federal gift tax reporting if the amounts exceed $13,000 per donee. Also, would the friend want to safeguard the funds from the children's creditors, etc. or restrict access to them? Again, the answers to these questions depend upon the amounts involved and your specific situation. You asked for the "best" way to make this transfer, and the best way is not usually the easiest. I recommend that she meet with an experienced estate planning attorney in her community before doing anything.

    This response contemplates only the laws of Ohio and is not intended to apply to other jurisdictions. None of the information in this response should be used or relied upon as legal advice or legal opinion about specific matters, facts, situations or issues. Viewing it does not establish an attorney-client relationship between you and Sherrille D. Akin, the law firm of Isaac, Brant, Ledman & Teetor LLP, or any of its individual attorneys

  3. You are going to need to consult with an estate or tax attorney, or perhaps a family law attorney well-schooled in probate, estate and tax issues, but it should only cost you $100 to $500 for the help you need ... unless some type of trust is required.

    The amounts are important. Whether you, the friend and the children are all on good terms is important. The children's ages may matter.

    I would like to give you a better answer, but there really is no good answer to your question without a much more complete understanding of all the facts.

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