Parents and grandparents often want a child to receive life insurance benefits someday. Naming a minor as beneficiary is allowed, but the way the benefit is handled requires some planning.

Minors and Legal Control

Minors are unable to sign for or handle large amounts of money legally, and they don’t reach the age of majority until 18 years old in most states and 19 or 21 in some states. If you don’t make other arrangements, the court will likely have to appoint a guardian or conservator to be the recipient of the funds. This involves extra paperwork, takes time and typically results in court oversight of the funds until the child becomes an adult.

Planning Options Available

There are some very practical solutions available to policyholders. One option is to utilize a trust which allows the policyholder to control when and how much the child will receive. Trusts can even be set up to distribute the proceeds at different ages. Your life insurance agent at Windgate Insurance Agency Inc., serving New Windsor, NY can help you to set up the beneficiary naming so everything goes according to plan.

Choosing the Right Setup

What is best depends on how much money is involved, the age of the child, and the goals of the parents. Custodians are fine for small amounts of money. Larger sums of money might require a trust. Whoever you pick needs to be trustworthy, organized and agreeable to being appointed. It’s also a good idea to name a backup. Policy owners can call the insurance company to inquire about its forms and any minor beneficiary restrictions.

A minor can absolutely be a beneficiary with the right structure in place. Your life insurance agent at Windgate Insurance Agency Inc., serving New Windsor, NY, can help families compare options and complete the forms correctly.