Children’s protection in the event of parents’ death: Comprehensive guide for families
18.04.25
7
Minutes
Katrin Straub
Managing Director at nextsure
The thought of one’s own death is difficult, but for parents, making arrangements is essential. Find out how you can provide for your children in the event of the worst happening, from financial support to putting guardianship arrangements in place. This is how you create security for the future of your loved ones.
The topic in brief and concise terms
A term life insurance policy with sufficient cover (e.g. five times your annual gross salary) is essential to secure your children's financial future in the event of your death.
Please make absolutely sure that guardianship for minor children is arranged through a handwritten or notarised custody directive, so as to best serve the child’s welfare.
The statutory orphan’s pension (approx. 10% for half-orphans, 20% for full orphans of the deceased’s pension) is often not enough; private provision and a will are therefore essential.
Immediate measures: The key points for protecting your children
Term life insurance is often the first building block. It closes financial gaps after a death. At least five annual gross salaries are considered a guideline for the insured sum.
With a guardianship directive, you appoint a guardian. This person takes care of your minor children. The family court gives considerable weight to your wishes.
A will governs the distribution of your assets. It can also supplement or include the guardianship directive. Without a will, intestate succession applies.
The state orphan’s pension provides a basic level of support. Half-orphans receive around ten per cent of the deceased person’s pension. This amount is often not enough to cover living expenses.
An emergency folder containing all the important documents helps survivors. It should include contracts, directives and powers of attorney. That way, everything is quickly to hand in an emergency.
These first steps form a solid foundation. In the following sections, we take a closer look at the individual aspects.
Ensure financial stability: term life insurance and orphan’s pension
Term life insurance (RLV) is a central pillar. It secures your children’s standard of living and education. The sum insured should cover loans and ongoing costs for at least five years.
Name your children as beneficiaries. In the case of minors, a guardian can manage the money in a fiduciary capacity. Clear arrangements for the beneficiary designation are crucial.
The statutory half-orphan’s pension amounts to ten per cent of the deceased parent’s old-age pension. The full-orphan’s pension is twenty per cent. These amounts usually cover only basic needs.
Determine your children’s financial needs precisely. Take into account education costs of several tens of thousands of euros. Daily living expenses also add up over the years.
In addition to term life insurance, there are other ways to provide for the future. An education insurance policy can build up capital specifically for university or starting a career. These products often offer guaranteed benefits after 15 years or more.
A solid financial foundation has been established. Now we look at the legal precautions.
Create legal certainty: make custody and wills legally binding
A custody directive sets out who will become the guardian. It must be written and signed by hand. Alternatively, notarisation is possible, which can cost around €75.
Choose the guardian carefully. Discuss this responsible role with the person. The family court will review the suitability of the named guardian.
A will regulates succession and the division of assets. It can also include instructions regarding guardianship. Without a will, statutory succession applies, under which children are first-order heirs.
For unmarried parents, each parent needs a separate custody directive. For married parents, a joint document is sufficient. If the parents name different guardians, the directive of the parent who dies last applies.
Review these documents every three to five years. Life circumstances and relationships can change. Updating them ensures your current wishes are reflected.
After the practical steps, we will now take a closer look at the expert details.
Utilise expert knowledge: nuances of inheritance law and tax optimisation
Without a will, statutory succession applies. Children inherit in equal shares as heirs of the first order. Spouses inherit alongside the children.
Even if disinherited, children are entitled to a compulsory portion. This amounts to half of the statutory inheritance share. Complete disinheritance is only possible in extreme exceptional cases.
Inheritance tax offers children generous allowances. Per child and parent, four hundred thousand euros is tax-free. This allowance can be used again every ten years for gifts.
In addition, there are maintenance allowances for children. These depend on age and can amount to up to 52,000 euros. [,-4,]
Our expert tip: Well-planned gifts made during your lifetime can significantly reduce the subsequent inheritance tax burden. Advice on this is often worthwhile.
But there are also specific situations and pitfalls to bear in mind.
Managing special life situations: protection for single parents and blended families
For single parents, the protecting the children is particularly urgent. A term life insurance policy is often the most important pillar here. The sum insured should cover maintenance until the children become financially independent.
In blended families, the situation is more complex. Stepchildren are not automatically legal heirs. Clear provisions in a will are essential here.
Parents can also leave debts behind. A term life insurance policy can cover loans, such as a home financing loan. This prevents children from starting life with debts.
Our expert tip: After a separation or divorce, beneficiary designations should be reviewed across all insurance policies. This ensures that, in the event of a claim, the desired people are taken into account.
Protection is a dynamic process that requires adjustments.
Keeping your provisions up to date: Long-term planning and regular adjustments
Adjust your sum assured dynamically. When another child is born or salaries increase, an increase is often necessary. Many policies offer guaranteed insurability options without a new medical examination.
The term of a term life insurance policy is crucial. It should extend at least until the youngest child turns 25. By then, their education is usually complete.
Also think about your own protection. Income protection insurance safeguards the family income if you are no longer able to work. This eases the burden on the family during your lifetime.
Our expert tip: Schedule a cover review every three to five years. An expert can help identify gaps and make improvements. Your life situation changes, and your provision should too.
Comprehensive cover provides peace of mind and security. Take your financial provision into your own hands.
Request your individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete suggestions for optimisation.
More useful links
The German Pension Insurance offers comprehensive information on orphan's pension in Germany.
Further details on pensions for survivors can be found on the pages of the German Pension Insurance.
The application pack for claiming orphan's pension is provided by the German Pension Insurance.
Frequently asked questions about checking orphan's pension are answered by the German Pension Insurance in its FAQs.
The Federal Statistical Office (Destatis) offers tables on infant mortality in Germany.
Information on deaths and life expectancy in Germany can be found at the Federal Statistical Office (Destatis).
The Federal Statistical Office (Destatis) provides data on causes of death in Germany.
FAQ
As a married couple with children, do we need term life insurance for both parents?
Yes, it is often sensible for both parents to take out term life insurance, especially if both contribute to the family income or if one has the main responsibility for childcare and the household, the loss of which would also cause high costs. The amount can be adjusted individually.
Can I name my children directly as beneficiaries in term life insurance, even if they are minors?
Yes, that is possible. However, it is advisable in this case to appoint a guardian or trustee to manage the sum assured until the children reach the age of majority.
What is the difference between a custody directive and a custody power of attorney?
The custody directive regulates guardianship in the event of the parents' death. The custody power of attorney, on the other hand, applies when parents are no longer able to exercise parental responsibility during their lifetime (e.g. due to illness).
How often should I review my advance planning documents (will, guardianship directive)?
It is recommended to review these documents every three to five years or following major life events (e.g. the birth of another child, divorce, significant changes in assets) and adjust them if necessary.
What happens if the guardian named in the guardianship directive cannot or does not want to take on the task?
In this case, it is advisable to name an alternate guardian in the custody directive as well. If this person is unable or unwilling to assume guardianship, the family court will decide.
Is inheritance tax payable on the payout of a term life insurance policy?
If the beneficiary is not the policyholder, the amount paid out may be subject to inheritance or gift tax. However, allowances apply (e.g. €400,000 for children). Clever contract structuring can help to minimise taxes.
