Why You Shouldn’t Name a Minor as Beneficiary (Video)
Why shouldn’t you name a minor as a life insurance beneficiary or retirement account?
I’ve got to talk a young, distraught mother in a few days about that very question. Her 4 year old child’s father named the child as the beneficiary of his life insurance policy. Dad was trying to do the right thing, but he had much better options available.
The life insurance company won’t release the money unless mom is named as the child’s legal guardian. It’s not enough that she is the girl’s mother. The 4 year old is “handicapped” because she is a minor.
The life insurance company wants to make sure the money is spent for the child’s benefit. That is why the mother must be appointed legal guardian.
So, we must go to court, spend $1,000’s on a guardianship, and have the expenses of an annual accounting for the next 14 years. For 14 years, a Judge will oversee the money. Not to mention, all of this information will be in the public record.
If dad had left the money to a trust, then no Judge, no guardianship, and no annual accountings would be required.
I’m Gary, the founder of DeWitt Law.