If you have a life insurance policy, we don’t recommend naming your children as your beneficiary. Actually, we never recommend naming a minor child as a beneficiary of any type of asset, whether it’s a retirement account, a life insurance policy, etc.
Why? If something happens to you, they then become the owner of that policy, but the law states that a minor child can’t own any assets of their own. This means they’d have to go to court and the probate court judge would decide who’d be the owner of that asset (or, more precisely, who’d help the child manage that money until they turn 18).
Essentially, if something were to happen to you before your minor child turns 18, someone who knows nothing about your family will be left to decide how that money is going to be spent on your child. It’s something that you have no control over.
Also, once that child turns 18, they’ll have immediate access to that money. If you have a life insurance policy worth $1 million, for instance, they’ll be able to access all of it… in cash.
This is why, when making your estate plan, you should think about how you want your children to be able to access that money before they turn 18. How would you want that money managed for them so that it helps them throughout the rest of their lives?
Speaking for myself, I would much rather have $1 million segmented into different stages of life—perhaps as part of a down payment for my son’s first house, or a reserve to pay for his wedding—than just giving him a lump sum at the age of 18.
If you have any questions about this topic or you have any other estate planning needs I can assist you with, don’t hesitate to reach out to me. I’d love to help you.
We never recommend naming a minor child as a beneficiary of any type of asset, whether it’s a retirement account, a life insurance policy, etc.