It’s a common practice in the life insurance industry, as minors are not allowed to be listed as direct beneficiaries. A custodian serves as the guardian of the money and assets intended for the minor child, making way for valid transfers under the Uniform Transfers to Minors Act.
How does life insurance pay out to a minor?
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. That guardian would then determine how the money is managed and spent—and it may not coincide with your wishes.
Can minors inherit cash?
A minor beneficiary can be named in a Will or a Trust or, by default, be entitled to an inheritance through intestate succession. However, in California, a minor cannot legally own property until they are 18 years of age and must wait until the age of majority to take possession of it.
Can a minor be a beneficiary in a will?
The answer is, they are not able to receive their inheritance, but doesn’t mean you can’t name a minor a beneficiary in a Will. It may sound strange, but as long as you include a caveat within the will. Which states, when a child is under-18 at the time of your death then their inheritance will go into trust. Then there should be no problem.
What happens when a child is a beneficiary?
Parents will, for the most part, want to name their children as a beneficiary of their estate once they have died. But what happens if that child is a minor (under 18) at that time? Are they able to inherit?
How is money looked after for children inheriting under a will?
A Trust for a minor beneficiary arises when a person under 18 inherits under a Will. Indeed you can express in your Will that you do not want a minor beneficiary to receive their inheritance until they are older (and perhaps more responsible) such as aged 21 or 25. Until that age is reached, their inheritance would be held in a Trust.
When to make a minor a beneficiary of a life insurance policy?
With UTMA/UGMA, the minor beneficiary will receive the entire sum as soon as they reach legal age. If the sum is quite large, many opt not to let an 18-year-old or 21-year-old have all that money in one fell swoop. Not sure if you should name your minor a beneficiary of your life insurance policy?
