How to Create a Trust From Your Life Insurance for a Child

There is no guarantee that a parent will survive to see a child graduate from high school or college. Many parents buy life insurance designating children as the beneficiaries of the death benefits. While a minor is unable to take control of these assets, the legal guardian can use the money for living expenses, school and future financial planning for the child. If a parent seeks more control in how the death benefits are used, a trust should be established to outline who maintains fiduciary responsibility over the minor's assets and how the money is used.

• 1

  Choose a guardian who will watch over your child. This is the person your child will live with and should be someone whom you respect as a person and as a surrogate parent for your child.

• 2

  Choose a trustee for the money. This person is responsible for managing the money, making investment decisions and disbursing the money according to your wishes. The trustee does not need to be the same person as the guardian. For example, you may trust your sister to teach your child high moral values and provide a quality life making her a solid guardian choice, but your brother may be much more savvy with money and financial matters making him a better trustee choice.

• 3

  Hire an estate planning attorney to write the trust document. There are several types of trust options available with different pros and cons. Discuss the options and create the trust that best suits your present and future needs.

• 4

  Call the insurance company and request a beneficiary change form.

• 5

  Complete the form, naming the trust as the beneficiary. Failure to name the trust sends the death benefits directly under the guardian's control.

• 6

  Sign and submit the beneficiary change form, providing the insurance company with a copy of the trust, its tax identification number and trustee contact information.