If minor children have been named as the beneficiary of your life insurance policy, then it can become legally complicated. Minor children cannot directly receive the proceeds of a life insurance policy. Instead, the state would appoint a legal guardian if you hadn’t done so, which is a lengthy and costly process.

What to do if the beneficiary is a minor?

If your minor child is the beneficiary of your policy, the death benefit could instead be given to a court-appointed legal guardian, even if the child’s other parent is still alive (although the surviving parent should still be able to become the custodian of the funds once he or she petitions the court).

Can a minor be named as a beneficiary of life insurance?

In the case of a minor child named as a beneficiary, an insurance company will not pay the benefit until the court has appointed someone to act in the child’s interest. However, appointing guardianship is a time-consuming process that costs money. Rather than naming your minor child as a beneficiary of your insurance policy, you can set up a trust.

What happens if you leave life insurance to a minor?

When you die and your beneficiary is still under the “age of majority” – your death benefit is designated to the court appointed guardian or custodian. They will get a custodial account or life insurance trust to put the death benefit into and receive the death benefit payout as the named beneficiary.

What happens if a minor is a death benefit beneficiary?

The significance of transferring the death benefit to your minor child is that you are directing the insurer to give money to an individual who is not considered to be legally responsible for himself. A child may not be able to manage large sums of money on his own.

Is it good to have a child as a beneficiary?

Unfortunately, purchasing life insurance for a child is frequently confused with having the child as the beneficiary of your policy. This, along with buying a separate life insurance policy on a child is not a good strategy. Why? Life insurance is designed to reduce the financial risks and burdens of your beneficiary’s because they depend on you.