Naming a Minor Child as a Beneficiary
While legally you can list a minor child as your beneficiary, it is not the best idea for your finances or the child, according to New York Life. Minor children cannot legally manage their own assets and, if you do not appoint a guardian for the child, the court can assign a guardian that does not have to take your wishes for the child or the money into account. A better way to manage the proceeds is to create a trust and name a trustee. With a trust, you set the terms for the disbursement of the funds and the trustee must follow your wishes.
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Instructions
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Consult an attorney for help in setting up a trust. Specify the age that the child can receive the bulk of the trust and any requirements that you have for the use of the funds. You can specify that the child must use the funds for college or job training before receiving the final payment.
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Select a trustee. While you can choose a family member or close friend as the trustee, according to the American Bar Association if the trust is large, you should consider hiring a financial adviser to act as the trustee. Choose a trustee with enough financial knowledge to manage the trust and file all of the proper reports and tax returns for the trust.
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List the trust as your beneficiary. Read over the trust carefully to make sure you agree with its terms before signing it.
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Tips & Warnings
Ask your attorney or financial adviser for the type of trust that is best for your needs and your financial situation. An irrevocable life insurance trust is best if the only item in the trust is life insurance policy. Trusts that include insurance policies and other property can be revocable, meaning changeable during your lifetime, or irrevocable, unchangeable without a court order, depending on your needs. The Internal Revenue Service does not consider an irrevocable trust as part of your estate so its value is not subject to estate taxes. Depending on the laws in your state, you can name a child as your beneficiary and specify a guardian under the Uniform Transfers to Minors Act (UTMA). Your insurance company can advise you of the laws in your state and provide you with the forms.
You cannot specify the age that the child receives the funds under the UTMA. The laws of your state specify the age.
