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Naming A Beneficiary For Your Life Insurance Policy

Understand The Consequences If You Want To Name A Minor As Beneficiary

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You can leave the proceeds of a life insurance policy to a person who is not yet an adult.

However, if you just leave the proceeds directly to a minor, the insurance company will not usually pay proceeds directly to a minor. A minor cannot legally contract and release the insurance company of further liability. A court may have to get involved to appoint a guardian to take responsibility for the money until the minor becomes an adult. (To learn more, see Alternatives For Taking Care Of Your Children).

Many life insurance policies contain provisions which provide that if the beneficiary is a minor, the insurance company can hold the insurance proceeds in trust until the minor becomes of age, at which time the minor will receive the proceeds plus interest. These provisions may permit the insurance company to make small payments to the person caring for the minor for the minor's benefit, but this is seldom satisfactory since the periodic payments rarely can provide any substantial support for the minor.

If you want the money to go for the benefit of a minor, consider leaving the money to a trust that benefits the minor or to a guardian for the child. To avoid ongoing trust fees and administrative costs, consider working with an attorney to create a trust that will not become active until you die. For more about trusts, see Trusts.


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