Is it a good idea to name your minor child as a beneficiary? You can name your minor children as beneficiaries, but if you die, the life insurance company will be unable to pay the children until they reach the age of 18 or 21, depending on your state’s laws.
In most cases, a guardian is appointed, and the money is withheld until the children reach legal age. A trust can also be established to assist in the management of the proceeds for your children.
For your children, you can name a trust as the beneficiary.
Trusts were once reserved for the wealthy, but now they are used by ordinary people to avoid probate delays and estate taxes. Trusts must be established in accordance with your state’s laws, so contact a lawyer if you have any questions about state regulations.
You will appoint a trustee who will be in charge of the assets until your children can receive them. Trusts can be simple or complex, depending on the number of children, the trustee’s payment terms, and how to avoid any unnecessary fees.
A pot trust is for everyone.
A couple, for example, has everything set up to leave to each other. If they die, their two children will inherit everything, and the father’s younger brother will serve as trustee, managing all assets on behalf of the children.
According to the website USA.gov:
- The grantor has the authority to direct how the trust funds are invested. The grantor and trustee may have very different perspectives on investment strategies, so make sure this is clearly defined.
- The grantor has the authority to specify how the assets should be divided down to the smallest detail, such as including an annual cost of living adjustment for the beneficiary or paying for travel expenses for others to visit the beneficiary in the event of illness.
- If the grantor wishes to ensure that any assets remaining outside of the trust are transferred to it upon death, he or she should consider having a “pour-over” will.
- They also warn you to avoid trust scams and fraud if you decide to create a trust for your family.
- Stay away from high-pressure sales tactics and fast-paced sales pitches.
- Avoid salespeople who give the impression that AARP is supporting or selling the product – AARP does not endorse living trusts.
- Do your research and obtain local probate laws from the Clerk or Register of Wills.
While naming your minor child as a beneficiary is permissible, it is not always a good idea. Please speak with a licensed agent at LifeQuotes about other options for distributing the proceeds of your death benefit to minor children.