What happens to life insurance money if beneficiary is under 18?

A life insurance company will not release a policy payout to a child who has not reached the “age of majority” (typically 18 or 21 depending upon the state). If a minor becomes the beneficiary of a life insurance payout, then the decision regarding what to do with the proceeds is in the hands of the probate court.

Can a minor be a beneficiary?

Minors in California (people under the age of 18) cannot own assets directly. Minors must own assets through a guardian. However, minors can be Trust beneficiaries. Trusts can be set up so the Trustee will hold onto and invest the assets until the beneficiary reaches a more responsible age.

Can a minor receive proceeds from a life insurance policy?

As New York Life explains, “The Uniform Transfers to Minors Act (UTMA) is the easiest way parents can ensure their children receive proceeds from a life insurance policy (or other assets, such as mutual funds, stocks, bonds etc). Under UTMA, an adult sets up an account for a minor at a life insurance company, bank, or other financial institution.

When to name a minor as your life insurance beneficiary?

Under UTMA, an adult sets up an account for a minor at a life insurance company, bank, or other financial institution. A custodian, named by the parents, controls and manages the assets for a minor until the minor reaches the age of majority in that state (usually between 18 and 21).

What happens if you leave money to a minor?

A child may not be able to manage large sums of money on his own. If you leave a death benefit of any amount to a minor child, you will need to appoint a financial guardian.

When to pay a death benefit to a minor?

When your children are minors, you will need to prepare properly to make sure they receive the death benefit the way you want it. Life insurance companies simply won’t pay a death benefit directly to a child until they have reached specific age. This age is based on the specific state you reside in and can range anywhere between 18 – 21.

When does life insurance pay out to a minor?

In the case of a minor child named as a beneficiary, an insurance company will not pay the benefit until the court has appointed someone to act in the child’s interest. However, appointing guardianship is a time-consuming process that costs money.

A child may not be able to manage large sums of money on his own. If you leave a death benefit of any amount to a minor child, you will need to appoint a financial guardian.