As I've mentioned before, my dear dad was a financial planner who got his career started by selling disability and life insurance.
That means he was really well prepared for his regrettably short retirement and for his estate. One of the wonderful gifts he left for myself and my sister was a life insurance policy. My sister and I were named as both the owners and beneficiaries of the policy. He did this so that my sister and I would not have to worry about estate taxes on the benefits--which we potentially would have had to pay if Dad had been the owner of the policy. Dad was a smart cookie and taking care of us like this was one way he showed his love.
I've never been a life insurance beneficiary before, so much of what I'm encountering has been a little confusing/new/tough to figure out. Working as I do in personal finance blogging, I feel like I know just enough about the subject to know just how much I don't know. Add to that the fact that I'm feeling a little weird about this money--I very much wish I could have my father back, but making plans for how to use the insurance money is undeniably intriguing--and dealing with the life insurance benefits has been a little strange.
It started with knowing how to receive the benefits. My father was insured through MetLife, which offers something called Total Control Accounts, which they really try to sell the beneficiaries on. Basically, this settlement option keeps the money under MetLife's control (I like to imagine Snoopy is the one handling the accounting, with a pencil behind his ear and an old-fashioned paper-reciept calculator set up on top of his dog house). The money will continue to accrue interest, which will become part of my payout eventually, and I can write a draft for any amount up to the full benefit at any time. MetLife really wants beneficiaries to take this option, because it means that they get to hold onto/use the money for longer. According to their literature, the interest rate is calculated weekly, interest accrues daily, and it is credited monthly.
The other option was to take a check for the full amount.
Since I needed to talk to my financial adviser about where this money was going, I decided to go with the Total Control Account. As I told my sister when she and I were trying to figure out the best course of action, this was Dad's insurance decision, and he would have made a good one for us. It's possible the money won't stay in that settlement account for long as I start using it for various things, but I know that it's safe where it is and I have flexibility and options.
Now, as I'm waiting for the paperwork to go through, I've had some time to consider what I want to do with the money. My sister told me she planned to give a portion of her share to a children's hospital, which I thought was a wonderful idea. My father loved kids. It took me until I was about 13 or 14 to realize that most of my friends' fathers didn't wave at little kids and flirt with babies. Dad was unabashedly happy to interact with little ones, in a way you rarely see in grown men. So I'm pleased to follow my sister's suggestion to give away a portion of the money in Dad's name to help children in need.
As for the rest, I'm going to put the majority towards my own retirement and some towards LO's and Thing 2's* college funds.
I like to think that Dad would approve of my plans for the money. He did once say he would get down on his hands and knees to scrub floors to pay for Harvard if that was where my sister and I wanted to go, and I feel similarly about my kids' college educations. (My feelings about college are evolving somewhat, considering the spiraling expense and the relative lack of return, as much as it pains me to look at education from a purely financial perspective. But anything I can do to take finances out of the education equation and that will allow my kids to follow the educational or life path that will bring them the most fulfillment and success makes me feel good.)
It feels strange to suddenly have this money. J and I are doing fine without the money, and my retirement and the kids' educations would certainly be taken care of without it. That's part of the reason why I want to make a donation to charity that is larger than we could afford--because that is something that I know I couldn't do without this gift, and I'd like to pay it forward.
I just hope to be worthy of this last gift from my dad, and I hope that I am responsible with it.
*I have not yet announced to my Dollar Stretcher readers the big news that J and I are expecting baby #2, in mid-September. Before we knew that this baby was also a boy, J started referring to the baby as Thing 2 (as in, the second of the Cat in the Hat's two associates), and it stuck. So even though we've picked out a lovely name for our second son, I'll probably continue to refer to him as Thing 2 online.