Sprinkling Provision

DEFINITION of 'Sprinkling Provision'

A provision within a life insurance agreement that allows the trustee of the policy to spread the death benefit around to the beneficiaries at his or her discretion. The sprinkling provision gives the beneficiaries who are in greater need of the funds the opportunity to receive a greater portion of the payout than if the funds were divided equally.

BREAKING DOWN 'Sprinkling Provision'

For example, let's assume that a policyholder recently died and the individual has four children. Let's also assume that two of the children are financially well-off and that the others have recently entered into financial difficulty. The sprinkling provision that is embedded in the insurance contract would enable the trustee to attribute a significant portion of the death benefit to the children in need of the funds and give proportionally less to the ones who do not need the extra money.