I’m going through a divorce, and I’m about to buy a $600,000 life insurance policy. My 9-year-old daughter would be the beneficiary. I need a trustee, but how do I pick a good one?
First, your daughter wouldn’t be the beneficiary. You would leave it in a trust for her benefit. And I’m not sure I’d depend on an ex-husband to handle something that requires this much integrity. You’d be better off hiring a good attorney to execute the trust upon your death, or you can look for a bank that has a trust department.
Once you decide on a trustee, you must remember to clearly and specifically state what you want done with the money. Don’t say to invest the money appropriately, because what a banker views as an appropriate investment and what I view as an appropriate invest are usually very different. A banker might put the money in CDs, or certificates of deposit, while I’d probably look at something like mutual funds, which have a much better rate of return.
In many cases, a trust for a child is put in place to pay for their first car, a medical situation or their college education, but this is completely up to you. The balance of the money might go to them when they reach age 21, while they receive a monthly stipend for food and other essentials while they’re younger.
I’m proud of you for thinking ahead, Marie. I know divorce is hard, but your little girl is lucky to have such a good and caring mom on her side!
How do you feel about using an online bank for your emergency fund?
I don’t think that’s a problem at all in most situations. Just make sure you do a little research. Know who you’re dealing with and that they’ve got some strength. A bank that is known as a “click and mortar”—one that has a physical location as well as online—would be my preference. Some of them have great debit card programs that includes debit card rewards and high-interest checking accounts, too.