November 6, 2013   Inheritance

The Dangers of Designating a Minor as a Beneficiary

Designating a Minor as a Beneficiary Chances are, most adults have at least one account, investment, or other financial instrument that has a beneficiary designation. On the surface, this type of estate planning may seem simple. Realistically, all a person has to do is fill in the blank with a person or entity’s name. However, perhaps due to the outward simplicity of beneficiary designations, many people fail to avoid this common pitfall associated with beneficiary designations.
The pitfall occurs when a person designates a beneficiary who is either a minor or legally incompetent. For example, were you to take out a life insurance policy that names your minor child as the primary beneficiary, then pass on before your child reaches the age of majority, the life insurance company would not pay out to your child. Your executor will likely have to go through the process of securing a court-appointed guardian to accept and manage the money on behalf of your child.
This is often problematic for several reasons. First, the process of securing a court-appointed guardian is often costly and time-consuming. The fees associated with pursuing such an arrangement will likely be taken out of your estate, thereby reducing the inheritance for your heirs. Additionally, the court-appointed guardian may or may not be the person that you would choose. Finally, your primary beneficiary will receive full, unrestricted access to the funds immediately when he or she reaches the age of majority. This can be problematic because many young adults are not immediately prepared to responsibly handle large sums of money immediately upon reaching the age of majority.

  1. Rate Article:
Form Controls

Register or Login to Rate.


To Comment, reply, or recommend, please Register or Login

Free Estate Planning Checklist

Free Estate Planning Webinar

Stay Updated

Stay updated by receiving updates to's free resources, latest topics, premium content, upcoming events and more!

Subscribe to Our E-Newsletter