If you have children and you have life insurance, chances are you got the life insurance to support your children if something happens to you. So, it makes sense if you have named those minors as beneficiaries of your life insurance policy because you want the money to be there for them.

BUT - you should know that this is creating a potentially giant headache because minor’s can’t own money. Consequently, if you die and your minor child is bound to receive your life insurance proceeds, the probate court will be involved. The court will appoint someone to be in charge of the funds until your child reaches 18 years old and at that point, your child will receive the life insurance proceeds outright, no questions asked, no guidance or oversite, no concern for what the 18 year old will do with it.

Most people don’t think it’s a good idea to give an 18 year old hundreds of thousands of dollars.

The way to solve these problems is with a revocable trust. You have your life insurance pay to the trust, rather than your minor child, and then the trust can manage how the funds are managed and distributed. You can delay the date your child will be handed money outright and, in the meantime, provide guidance for how you would like the money to support your children through school and early adulthood.

If you would like to chat with me about this, feel free to contact me using the CampSite link in my BIO.

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