Your children may be named as the primary or secondary (or contingent) beneficiaries on your life insurance policy. However, it is important that you be familiar with the protocols for naming your children as beneficiaries to your life insurance policy, especially if your children are minors.
Life insurance protocols
- If you choose to name your children as the primary beneficiaries, the benefit amount of your life insurance policy will be paid to them after you die.
- If you are married, your life insurance company may require that your spouse provide written consent for the value of your life insurance policy be given to someone other than your spouse upon your death. If you live in a community property state, the written consent of your spouse in this instance is required.
- If you name your children as secondary beneficiaries, your money will be distributed to your primary beneficiary. Your money will only be given to your children in the event the primary beneficiary is deceased at the time of your death.
What if your children are minors?
A minor child is a child who has not yet reached the age of majority, which is 18 or 21, depending on the state of residence. A child is not legally permitted to manage money until he or she has reached the age of majority. For this reason, naming minor children as direct beneficiaries is not recommended.
If your children are minors, you may want to make arrangements to make sure the money from your life insurance policy is protected and that your children would benefit from the money in the event that you pass away. Life insurance companies will generally not pay death benefits directly to minors. It is therefore necessary that you designate a guardian or trustee if your children are minors and named as beneficiaries on your life insurance policy.
What are your options?
- If your children are minors, you may choose to create a trust for your children for the benefit amount of your life insurance policy and have a trustee manage it until your children reach the age of majority.
- If you create a trust, you have the option to dictate how much money is distributed to your children and when it is distributed.
- You may choose to name a guardian to care for and manage the benefit amount for your children.
- The person you may choose to appoint as guardian for your children may be the same person you appoint as the trustee of the trust you create.
You may name your children as beneficiaries to your life insurance policy. However, be sure to adhere to the protocols, especially if you are married and naming your children as the primary beneficiaries or if your children are minors.
Kathy Kara is a blog writer on life insurance topics for sites including Best Life Insurance Deals.