Can I Leave My Life Insurance to My Minor Child?

Did you know a minor child may be designated the beneficiary of a life insurance policy?

A minor child cannot, however, individually receive the proceeds paid upon the death of the owner of the policy.

The beneficiary of a life insurance policy must be at least 18 years of age in order to individually receive the proceeds.

If the minor child is less than 18 years of age, the proceeds must be paid to the guardian of the property of the minor child until he or she attains age 18 years of age or to his or her parent if the amount of the insurance is less than $15,000. This is because a minor cannot own property.

The proposed guardian of the property can be nominated in the insured’s last will and testament.

The proposed guardian of the property named in the will, should be approved by the court order unless he or she is under 18 or a convicted felon. Further, a nonresident of another state may serve as the guardian of a resident ward’s property if he or she is related by lineal consanguinity to the minor or a spouse, brother, sister, uncle, aunt, niece, or nephew of the minor, or someone related by lineal consanguinity to any such person.

What you may not know, however, is that before the insurance company can distribute the proceeds, a petition to appoint the guardian of the property must be prepared by an attorney and the petition must be approved by the circuit judge. The attorney fee for preparing the petition is approved by the circuit judge and the approved amount is drawn against the funds in the guardianship.

The guardian of the property must prepare and file an annual return with the circuit judge reporting the insurance proceeds remaining in the possession of the guardian and the annual income earned by the guardian on the investments. In addition, the guardian of the property must file a bond with the court to insure that the minor will be reimbursed for any loss or theft of the insurance proceeds. Since the premium expense for the bond is deducted from the proceeds, it may be best to request the circuit judge to order the insurance proceeds to be deposited in a designated financial institution. Then, the insurance proceeds (or a portion thereof) can only be drawn after a court order is issued authorizing the withdrawal and approving the expenditure.

This is just one of the critical points to consider when you are creating an estate plan that will leave money to minor children.

We know that this article may raise more questions than it answers for you and encourage you not to wait to schedule a meeting with our experienced local team.