Most parents buy life insurance for their kids' sake, so naming the kids as beneficiaries feels natural. But there's a catch many families don't learn about until it's too late.
The problem: minors can't take the money directly
Insurance companies generally won't pay a large death benefit straight to a child under 18. If your minor child is the named beneficiary and no plan is in place, a court may need to appoint someone to manage the money until the child is an adult. That can mean delays, legal costs and court oversight, and the person managing the money may not be who you would have chosen.
In Florida, for example, a parent can generally manage only a limited amount for a child without court involvement. Larger amounts can require a court-supervised guardianship.
Options parents use instead
1. Name a trust. A trust you set up (often with an estate attorney) can be the beneficiary. You choose the trustee who manages the money and spell out how it's used, for example for school, housing, or paid out at certain ages. This is often the most flexible option.
2. Name a custodian under the Uniform Transfers to Minors Act (UTMA). Many carriers let you name an adult custodian for a child's share. The custodian manages it until the child reaches the age set by state law. In Florida that's generally 21, and in some cases it can be extended to 25 if the transfer allows it. It's simpler than a trust but gives you less control after that age.
3. Name a trusted adult. Some parents name a spouse or relative and trust them to use the money for the kids. It's simple, but that person has no legal duty to spend it on your children, and the money could be exposed to their own debts or divorce.
Quick checklist
- Name a primary and a contingent beneficiary
- Review beneficiaries after a birth, marriage, divorce or death
- Make sure your will, guardianship choice and beneficiaries all line up
- Talk to an estate attorney about whether a trust fits your family
Your advisor can help you update beneficiary designations on your policy, and an attorney can help with trusts and wills.
Have a question? Ask Jarvis
Jarvis is a free AI concierge open to the general public. Ask it anything about this topic in plain English, any time, at mmalifeusa.com/jarvis. When you're ready, a licensed Moving Mountains advisor can walk you through real options. No pressure, and we don't sell your data.
