AAA Life Insurance Company


Life Resources

Learn more about life insurance with these useful materials

Life Resources

Learn more about life insurance with these useful materials

April 6, 2017 // All resources---tips // beneficiaries

Reconsider Naming Your Minor Child as Your Beneficiary…

When you have children, you’ll go to the ends of the earth to protect them and make sure they are safe and happy. It’s a major reason why parents buy life insurance—or more of it. Having life insurance means that if something happened to you, your family would be OK financially.

It’s important, to make sure that you have named the correct beneficiary to your life insurance policy. The beneficiary receives the proceeds of a life insurance policy if you were to die. Most often that’s a spouse or partner who will then manage the money. But what if the unthinkable happens and both parents die? Or what if you’re a single parent?

If minor children have been named as the beneficiary of your life insurance policy, then it can become legally complicated.

Minor children cannot directly receive the proceeds of a life insurance policy. Instead, the state would appoint a legal guardian if you hadn’t done so, which is a lengthy and costly process. That guardian would then determine how the money is managed and spent—and it may not coincide with your wishes.

Making sure your children are OK

There are a number of options you can choose instead to make sure your children receive the benefits of your life insurance planning.

Under the Uniform Transfers to Minors Act, you can set up an account for your child with a financial institution, such as a bank or life insurance company. (This is in effect for most states.) You name a custodian—a person you trust—who would manage the life insurance money, and other assets you might have in the account, as they saw fit while the child was a minor.

You can also establish a trust for your child and name the trust as the beneficiary of the policy. This is a more precise, albeit complex, way to ensure that your exact wishes for your children are followed. The trust, which is a legal document, spells out the person you choose as the trustee and how you’d like the money to be managed and spent.

To ensure the trust is set up properly, consult with a qualified attorney.

Also keep in mind that while a will can spell out your general wishes, it is not the place for you to name your life insurance beneficiary. Please remember to designate beneficiaries in your life insurance policy, the life company has this on file and the policy should confirm this important information. Legally the proceeds of a life insurance policy will be paid to the beneficiary identified in your policy and not in accordance with any instructions contained in your will.

While it may seem like a big job to get this step right, keep in mind that not doing so could have repercussions for your children for many years to come.


This post is not meant to be legal advice.

AAA Life and its agents do not provide legal or tax advice. Therefore, you may wish to consult independent legal, tax, or financial advice prior to the purchase of this policy.


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