What Does Sprinkling Provision Mean?

The term refers to a disposition that may be present in a life insurance contract and which lets the contract’s accredited person (the so-called trustee) to spread or to share out the death benefit between the several beneficiaries at his or her individual choice or judgment.

Allowing this free decision to the trustee may have some important advantages from the point of view of those beneficiaries who have financial needs. A sprinkling provision may provide these beneficiaries with larger funds than they would receive should the funds be distributed equally. Therefore due to the sprinkling of the death benefit, beneficiaries get an appropriate portion based on their financial needs or other underlying principles.

Sprinkling Provision Explained

As a simple example, if the owner of the policy dies and have three children one of which has financial difficulties, and the other two have creature comforts, then a sprinkling provision may be a very good disposition. If the trustee knows this situation, he or she is very likely to give a significant part of the benefit resulting from the contract to that child who is in financial difficulties, with the other two children without financial problems getting less.