Put it in a Trust - A solution for SGLI beneficiaries who are minor children

  • Published
  • By Capt. Janet Ashitey
  • 100th Air Refueling Wing Legal Office
RAF MILDENHALL, England --  Airmen need to understand the importance of planning ahead to take care of the financial needs of family members.

The Service Members Group Life Insurance is one way Airmen can ensure the financial health of their families.

The program provides low-cost term life insurance coverage to eligible military members.  Active duty service members are automatically enrolled for full coverage upon entering military service, which amounts to $400,000 unless the member declines SGLI coverage or selects a lesser amount than maximum coverage.

Military members often view SGLI as a means to financially provide for the needs of their minor children, but without a thorough understanding of how best to safeguard the funds.

Legally, a minor child is any person under the age of 18. It's important to understand that minors cannot inherit property until they turn 18. Naming a minor child as the beneficiary for  SGLI means a court will have to appoint a guardian before the funds can be released. This means additional costs and delay.

One way to avoid this is to make an adult family member or a friend the beneficiary of SGLI with the intention that the money be used for the benefit of the minor child.

However, this has serious pitfalls. Money left to an adult becomes his or her property.  If the money is just given to them outright, there is no legal mechanism to ensure they use it properly. They could legally spend it on whatever they like. And even if the family member or friend uses the money for the benefit of the child, it could be lost to creditors or legal judgments against the adult.

When planning for the future, military members have the opportunity to consider a trust as a flexible way of giving away assets without simply passing them directly to the beneficiaries. 

Using SGLI coverage to fund a trust upon the death of a service member is one way to ensure the financial security of family members, especially minor children. A trust is a legal instrument that can be created in a will, which allows the service member to name a trustee to control money for a beneficiary.

An easy way to set up a trust is to incorporate it into the Last Will and Testament of the service member during a legal assistance appointment. Filling in the SGLI form will not be enough to establish a trust.

Along with a will, any legal assistance attorney will help draft the necessary language needed in the SGLI form to ensure the funds are appropriately allocated. The SGLI form will contain language that leaves the funds to the trustee to fund the trust created for the benefit of the minor children listed in a Last Will and Testament.

For more information or to make an appointment with a legal assistant attorney, call DSN: 238-2028 or commercial, 01638 542028.