Documents and Considerations

Trusts


A trust is a legal entity that holds assets outside of an individual’s personal estate.

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There are two basic types of trusts:

1. Revocable and Irrevocable Trusts: These types of trusts are created during the lifetime of the grantor and may or may not allow active management of the assets contained within them. A grantor can make changes to a revocable trust at any point during their lifetime, but contributions to an irrevocable trust shift ownership of assets outside of the grantor’s estate immediately, and therefore changes cannot be made without consent of the trust’s beneficiaries. Both types of trusts are managed by a trustee, who then distributes assets to beneficiaries after the death of a grantor at a time designated by the trust agreement. These trusts allow a trustee to immediately take care of the grantor’s end-of-life affairs and distribute assets without having to go through probate. Note that only assets can be managed by a trust; one cannot appoint a guardian for minor children in this way.

2. Testamentary Trust: This type of trust is created upon the death of the grantor by their Last Will and Testament and allows the grantor to manage their assets outside of a trust during their lifetime. It is often used when the grantor’s beneficiaries are minors. However, it does not avoid probate or the associated expenses – probate always accompanies the determination of the validity of a will and carrying out its instructions.

All types of trusts contain three main people: the grantor, the trustee(s), and the beneficiaries. The grantor is the person who creates the trust and whose assets are put into the trust to distribution later on. A trustee is a person named by the grantor to administer the trust – following the instructions laid out in the trust documents and ensuring that beneficiaries receive their designated assets as appropriate. A grantor may name more than one trustee or name a successor trustee who can step into the position of trustee if the individual(s) originally designated can no longer manage the trust. The beneficiaries are those who receive assets from the trust. A trust document is typically signed by both the grantor and the trustee as well as a notary. This document is crucial when it comes time for the trustee to administer to the grantor’s estate.

If a trust is a beneficiary of a life insurance policy, Navy Mutual representatives will request to see the original trust documents for verification. If you are a trustee and you cannot immediately locate trust documents, check locations where you commonly store important documents, such as a fire safe box or a safety deposit box. If you cannot find the documents in these locations, speak with the attorney who set up the trust.

Last Will and Testaments


A Last Will and Testament, usually referred to as a “will,” is a legally binding document that details one’s wishes for how their estate should be handled after their passing. Within it, one can designate an executor, beneficiaries, and a guardian for any minor children. Furthermore, a will is typically used to share explicit instructions for how and to whom remaining assets should be distributed.

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An executor is a person named in a will who is tasked with making sure that the terms of the will are carried out. They are responsible for filing the appropriate paperwork with probate court, ensuring that outstanding payments are made after one’s passing, and distributing assets to beneficiaries. An executor is often a family member or friend, but they could also be an attorney.

Beneficiaries are the entities to whom assets will be distributed after one’s passing. They are often individuals, but one could also list a business, charity organization, trust, or other entity. It is important to note that a beneficiary designation in a Last Will and Testament does not override a beneficiary designation on a life insurance policy. Any individual listed as the beneficiary of a life insurance policy will receive the death benefit regardless of contradicting wishes expressed in the deceased’s will.

A guardian is a person named in a will who is entrusted to care for children under age 18 or those who are physically or mentally unable to care for themselves after one’s passing. Because one does not know the timing of their passing, it is often wise to choose alternate guardians in the event that the named guardian cannot fulfill their duty of care.

Learn more about Last Will and Testaments here.

Other Legal Documents


Depending on the circumstances of your claim, Navy Mutual may request additional documents.

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Guardianship: When an individual assumes guardianship of a child, the court provides paperwork (an order or letter of guardianship, signed by a judge) to prove the new relationship between the individual and the child.

Power of Attorney: A power of attorney is a designation of a person who can take care of your finances at any point or act on your behalf if you become incapacitated. A durable power of attorney must act in your financial best interest and does not retain any power after your death. A springing power of attorney only becomes effective upon the occurrence of a specific event.

Divorce Decree: A divorce decree is an order delivered by a court that finalizes a divorce between two individuals. It includes all of the rules that must be followed that pertain to the divorce, including spousal support and child support payment arrangements.

Executor: After an individual passes away, the executor of the estate – as designated by the deceased’s Last Will and Testament – must bring the death certificate of the deceased and the associated Last Will and Testament to a probate officer or court. After verifying the executor’s identity and the validity of the will, the court will provide a letter of testamentary, which gives the executor the authority to access the deceased’s accounts and manage their estate.

Considerations for Minor Children


If the beneficiary of a life insurance policy is a minor at the time of the insured’s death, there are settlement options in which funds can be left at Navy Mutual until the minor beneficiary reaches adulthood. We suggest that you speak to a financial advisor to determine the best course of action for your specific needs. Active duty servicemembers have access to financial counselors at no cost through the Department of Defense Office of Financial Readiness. Family members of those killed while on active duty also have access to financial counselors after the death.

If the owner of a minor’s life insurance policy passes away before the child can take ownership of the policy, the policy ownership will pass to the designated successor owner. Complete the Successor Owner Designation form to define your successor.

Settling an Estate


Settling an estate involves finalizing the affairs of someone who has passed away. This requires paying for funeral expenses, filing their will (if they had one) in probate court, distributing their personal property, and filing their taxes. In order to settle an estate, you will be required to obtain certain documents granting you permission to access accounts, make financial decisions, and file taxes. As the beneficiary of a life insurance policy, you may receive certain tax forms as well.

Letters of Administration


If you are the deceased’s next of kin, you can apply for the Grant of Letters of Administration from the court. You will be required to submit a death certificate and a copy of the deceased’s Last Will and Testament (if there is one). It is likely that the court will also ask for a statement of the estate’s assets and outstanding debts. After confirming your relationship to the deceased, the court may grant you Letters of Administration. This allows you to access the deceased’s financial accounts and assets and to manage them according to law.

Contact an attorney for help obtaining Letters of Administration.

Small Estate Affidavits


If the insured passed without a will, depending on the monetary amount of the assets involved, you may be able to use a small estate affidavit. A small estate affidavit is a written statement prepared by an attorney or obtained from the county clerk’s office that authorizes a person to claim the assets of the deceased outside of probate.

Large estates are required to undergo probate and do not qualify for the use of a small estate affidavit. Different states have different thresholds for what qualifies as a small estate; refer to the laws specific to the location of the deceased’s estate for further instruction.

Form 712


Form 712 is an IRS form used for finalizing the estate of the deceased. It reports the value of a life insurance policy’s proceeds. It is also used when a life insurance policy changes ownership.

You can obtain Form 712 by requesting one from Claims@NavyMutual.org or calling 800-628-6011.

1099s


A disbursement from a life insurance policy or annuity may result in the policy owner or beneficiaries receiving a 1099.

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Common reasons for receiving a 1099-R include surrendering a whole life insurance policy or annuity for its cash value, receiving payments from a Single Premium Immediate Annuity or settlement option plan, and receiving a distribution from a Modified Endowment Contract. Loan transactions on Modified Endowment Contract policies, including signed loans, Automatic Premium Loans, and interest rollovers will also generate a 1099-R, as will paying off a loan at the time of a 1035 exchange or paying off a loan as part of Reduced Paid Up benefit. You may receive a 1099-R if you receive distributions from Fixed Period, Life Income, or Single Premium Immediate Annuity plans.

You may receive a 1099-INT if you were the beneficiary of a life insurance policy and were paid any interest on top of the death benefit or if you receive payments from a Single Premium Deferred Annuity quarterly interest plan. You may also receive a 1099-INT if you received payments from SPDA Interest Only contracts or were paid interest on long-term care contracts.

Recipients of disbursements from long-term care contracts will receive both a 1099-LTC and a 1099-INT. The 1099-LTC will reflect the non-taxable basis portion of the long-term care payments. The 1099-INT will reflect the taxable interest portion of long-term care payments.

Identification Numbers


There are multiple situations in which Navy Mutual would request an identification number. It is the easiest way for us to confirm the identity of a beneficiary and is required if an estate or trust – and not an individual – is named as the beneficiary of a policy.

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Taxpayer Identification Numbers include:

  • Social Security Numbers
  • Employer Identification Numbers
  • Individual Taxpayer Identification Numbers
  • Taxpayer Identification Numbers for Pending U.S. Adoptions
  • Prepared Taxpayer Identification Numbers

You can learn more and apply for a TIN here.

Casualty Assistance

There are federal programs available to the survivors of servicemembers who die during active duty, as well as for veterans who die from service-connected injuries or illnesses.

Survivor Benefits

Survivors may be entitled to military survivor benefits after the passing of a servicemember or veteran. Navy Mutual representatives can help you understand and apply for those benefits.