Life insurance policies ensure that if something ever happened to you, your family would remain financially stable. Although it is possible to name your minor child as the beneficiary of your life insurance policy, it is not recommended. If your minor child has been named the beneficiary of your life insurance policy, then problems can arise if the minor child has not yet reached the age of majority at the time of distribution. In Florida, the age of majority is eighteen years old.
What Happens if the Primary Beneficiary Is a Minor?
As previously stated, minor children could not directly receive the proceeds of a life insurance policy. If the minor child is the primary beneficiary, the state will appoint a legal guardian if the decedent has not already done so. The process of the state appointing a legal guardian can be long and costly. The legal guardian will be responsible for preserving the minor child’s inheritance until they reach the age of majority.
If you choose to name a guardian as the primary beneficiary, you can avoid the legal process of the state having to select a guardian which would occur if you named a minor child as a beneficiary. A disadvantage of naming a guardian as the primary beneficiary is that the guardian may misuse the funds. If the guardian is not financially responsible, he or she may not honor your wishes with respect to the life insurance policy and for this reason, it is not recommended to name a guardian as the primary beneficiary.
Are There Ways to Ensure That My Minor Child Receives My Life Insurance Benefits?
There are other ways to ensure that your children receive your life insurance benefits. One way is to establish a trust for your minor child and name the trust as the beneficiary of the life insurance policy. That way, when the policy holder passes away, the insurance company would pay the death benefit to the trust. A trust is a far more detailed arrangement that provides increased protection to assets held for a minor beneficiary. The trust is a legal document that provides instructions to the trustee on how you would like your money to be used and managed. This would require the trustee to apply the inheritance fund for the care of the child according to the directions left in the trust.
The trust can also specify how much money is distributed and at what times. For example, the grantor, or person who sets up the trust, can instruct that the funds be used for educational purposes and for the remaining funds to be distributed at a certain age.
If you have enrolled in a life insurance policy and would like to have your child as the beneficiary, it is highly recommended that you reach out to trust and estates attorneys to assist you in setting up a trust.
