Choosing beneficiaries for your life insurance policy is an important decision. After all, they’re the ones that will receive money from your policy’s death benefit upon your passing. Therefore, it’s important to explore all your options and be selective about who you choose. If you’re wondering whether your beneficiary can be a minor, keep reading to find out.
Put simply, a life insurance beneficiary is the person or entity you assign to receive your policy’s death benefit when you pass away. You may choose one beneficiary or multiple beneficiaries, depending on the policy. It’s your personal decision. Some examples of common life insurance beneficiaries you might want to consider include a partner or spouse, child, or charity.1
If you’re a parent, you should know that it’s possible to name a minor as your primary beneficiary, depending on your insurance company. But there may be some legal implications. Typically, an insurer won’t simply give your minor child the death benefit when you pass away. Instead, the court will likely need to appoint an adult custodian to manage the funds until the child becomes an adult. Unfortunately, this can be an expensive, time-consuming process. It might also mean that less money will be available to your child.2
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Before you decide to name your minor child as a life insurance beneficiary, it’s a good idea to consider the benefits and drawbacks. If you do go this route, your child will eventually be able to use the death benefit as they need to. Once the funds are transferred to them, they can use it to help pay for health insurance, college, or everyday expenses. This can give them the financial help they need once they become a young adult.
The main disadvantage, however, is that your child won’t have access to the money until they turn 18 or 21, depending on your state. Keep in mind that the transfer process does not come cheap and can reduce the funds available to them. In addition, you lose control over who handles the funds, as the court will appoint this individual.2
If you determine it doesn’t make sense to name your child as a beneficiary, consider these alternative options:
With a trust, you’ll have more control because you’ll be able to specify how you’d like your death benefit to be distributed3. For instance, you may state that a portion of the funds be distributed for your child’s college when they turn 18, and then at age 25, they can receive the remaining amount to use in any way they wish.
If you can, consider assigning your spouse or partner as the primary beneficiary. This way, they can continue to handle your household finances and save money for your child’s future. If both you and your partner pass away, the trust can kick in.3
The Uniform Transfers to Minors Act (UTMA) requires you to name a custodian to manage your child’s assets until they become an adult.2 Then, the assets will be transferred to your adult child, who may use the funds in any way they choose.
While you can appoint a minor child as a life insurance beneficiary, doing so isn’t always the best option. Luckily, there are several alternatives to consider, such as establishing a trust or creating a UTMA account.
Aflac offers a variety of life insurance policies that can financially help protect your children and other loved ones. You can customize your coverage to your needs, with premiums that can fit your budget. Start chatting with an agent to learn more about the plans we offer and get a quote today!
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1 ValuePenguin - How to Choose a Life Insurance Beneficiary & How Claims Work. Updated October 26, 2022. https://www.valuepenguin.com/life-insurance/life-insurance-beneficiary. Accessed April 10, 2023.
2 LendEDU - Choosing a Life Insurance Beneficiary That is a Minor. Updated April 5, 2023. https://lendedu.com/blog/life-insurance-beneficiary-minor/. Accessed April 10, 2023.
3 Policygenius - Should I Name a Child as a Life Insurance Beneficiary? Updated February 23, 2023. https://www.policygenius.com/life-insurance/naming-a-child-as-a-life-insurance-beneficiary/. Accessed April 10, 2023.
Coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.
In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400. In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400.
Final Expense Whole Life Insurance is underwritten by Tier One Insurance Company.
The life insurance policy described herein contains an optional Accelerated Death Benefits Rider that is intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code. Aflac does not give legal or tax advice. Please consult with a qualified legal, tax, and accounting advisor before engaging in any transaction. In AR, AZ, ID, OK, OR, PA, TX and VA: Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions. For complete details, including availability and costs, please contact your local Aflac agent.
Content within this article is for informational purposes only and does not constitute legal, tax, accounting or medical advice regarding any specific situation.
Aflac cannot anticipate all the facts that a particular employer will have to consider in their benefits decision-making process.
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