Naming Children as Life Insurance Beneficiary

Life Insurance BeneficiaryWho knows what the future holds? It’s full of possibilities, both exciting and frightening. That’s why you’re making a plan to provide for your loved ones. Hopefully, you have a will, power of attorney for health care, financial power of attorney, and other key documents lined up and ready in case something happens to you.

In addition, you should have life insurance that covers your funeral expenses and other costs and to provide for your dependents. If you’re new to the life insurance process, you might be uncertain about whom to name as beneficiaries. If you are considering leaving the insurance money to your children, then there are a few things to consider first.

How Old Are Your Children?

If your children are adults, you can name them as a direct life insurance beneficiary of your policy. However, if you name minor children as a life insurance beneficiary, you need to appoint a capable adult, also called a guardian or custodian, to oversee the use of the money.

For married couples, the oversight issue is easy. The spouse is usually listed as the primary life insurance beneficiary, while the children are secondary beneficiaries. This means that your spouse would accept the benefits and then use them as necessary for the family.

But what if you are single or divorced? Or what if you and your spouse both pass away at the same time due to an accident? In these situations, you could choose a trusted family member or a close friend, someone who has a good relationship with your kids and knows how to handle money wisely. This person acts as custodian until your children have reached adulthood.

What Happens Without a Property Guardian?

Let’s suppose that you did not appoint someone to serve as a property guardian for the insurance benefits. The court will then select someone to serve in this capacity upon your death. That means that your children’s money will be in the hands of someone whom you didn’t choose as a financial caretaker and who may make poor financial decisions. ¬†This is not an ideal situation because as dealing with the courts can be expensive, intrusive and time-consuming.¬† To avoid this, talk to an experienced estate planning lawyer who can help you establish a plan for providing for your minor children.

Are There Other Options?

If you prefer to have extended control over the money and its use, you could set up a trust. With a trust, the insurance money stays safe and intact until your child reaches a specific age. You can also set terms and conditions that guard the use of the trust, and no one is allowed to access it except for reasons that you clearly state in your estate plan.

If you want to use a trust and appoint your spouse or partner as the trustee to handle the money, make sure that you clearly state that intent. Otherwise, your spouse may have to petition the court in order to be the trustee.

Arranging proper financial provision for your kids should be at the top of your to-do list. Take the time to do it right. Consult a lawyer, ask lots of questions, and contact your insurance for a “Change of Beneficiary” form if you need to make adjustments to your current policy. You might have to invest some time and effort, but at the end you’ll have peace of mind, knowing that your children will have what they need even if something happens to you.


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About Nicole K. White

After losing a close relative, Nicole witnessed the devastation, enormous expense and chaos caused by not having a simple estate plan. It is Nicole’s mission to educate parents, especially single parents, about protecting themselves, their families, minor children, and assets with comprehensive Estate Planning.

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