Can You Name a Minor as Beneficiary of Your Life Insurance?
Jun 20, 2023
Jamie Fleischner

Jamie Fleischner

20 Jun, 2023

When you name a minor as a beneficiary of a life insurance policy, it can have some legal and practical implications. Here are a few key points to consider:

  1. Guardian or Trustee: Typically, a minor cannot directly receive life insurance proceeds since they are considered incapable of managing the funds. Therefore, you would need to designate a guardian or trustee to manage the money on the minor’s behalf until they reach the age of majority (usually 18 or 21, depending on the jurisdiction).
  2. Court Appointment: If you haven’t designated a guardian or trustee in the policy, the court may need to appoint one to ensure the minor’s interests are protected. This process can involve legal fees and potential delays.
  3. Custodial Account: The life insurance proceeds can be held in a custodial account, such as a Uniform Transfers to Minors Act (UTMA) account or a Uniform Gifts to Minors Act (UGMA) account, depending on the applicable state law. These accounts are managed by a custodian until the minor reaches a certain age, typically 18 or 21, depending on the state.
  4. Restricted Access: Funds held for a minor beneficiary are generally restricted and can only be used for the minor’s benefit, such as education, healthcare, or basic needs. The custodian or guardian is responsible for ensuring that the funds are used appropriately.
  5. Lack of Control: By naming a minor as a beneficiary, you relinquish control over how the funds are used once they are received. It’s essential to consider whether the minor’s guardian or trustee will manage the money responsibly and in the best interest of the minor.
  6. Estate Taxes: Depending on the value of the life insurance proceeds and the applicable tax laws, estate taxes or inheritance taxes may come into play. Consulting with a tax advisor or an attorney can help you understand the potential tax implications.

It’s crucial to consult with a qualified attorney or financial advisor to understand the specific legal and financial consequences of naming a minor as a beneficiary of a life insurance policy. They can guide you through the process and help you make informed decisions based on your individual circumstances and the applicable laws in your jurisdiction.


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