Naming a Minor as a Beneficiary

When naming minor children or grandchildren as beneficiaries in your will, on a retirement account, or life insurance policy, it’s important to understand the complexities involved in transferring wealth to minors. Many people don’t realize that state laws commonly prohibit minors from owning or inheriting real property above a certain limit which can vary by state. It’s also extremely rare for insurers to distribute life insurance proceeds directly to minors. So how can you help ensure minor beneficiaries will be provided for, and their assets protected?

While several options are listed below, you’ll want to work with a qualified estate planning attorney to determine the strategy that best fits your family’s needs and situation, taking the age and education needs of minor children into consideration, the amount of wealth they may inherit, and the ability of the adult family members or trusted friends you name in your will to carry out your wishes.

Appoint both a personal and a property guardian in your will.This can be the same individual or different people, but don’t assume a personal guardian will be recognized by the courts as a child’s property guardian if not explicitly named as such in your will. Guardianship generally ends when the minor child turns 18.

Arrange for UTMA custodianship. An adult may be appointed as a custodian for assets left to/or gifted to a child under the Uniform Transfers to Minors Act (UTMA) until age 21. This appointment is made through the language of a will or living trust.

Establish a testamentary trust. Also called a “child’s trust,” a testamentary trust allows the trustee to use the inherited assets to fund education, health care, and everyday expenses for the child. Because it allows greater flexibility in the language and terms governing the trust, it can be extremely useful in preserving assets over time until the child is considered mature enough to manage substantial assets on his/her own.

Consider a special needs trust. A special needs trust can be established for minor or adult children with disabilities who may require care throughout their adult lives.

If you’d like to learn more about these and other options when naming minors as beneficiaries, or would like a referral to an estate planning attorney, please contact one of our Investment Representatives at your convenience.

This information is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

Securities and insurance products offered through Cetera Investment Services LLC (doing insurance business in CA as CFGIS Insurance Agency), member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC. Cetera Investment Services LLC and Cetera Investment Advisers LLC are not affiliated with the financial institution where investment services are offered. Investments are: *Not FDIC/NCUSIF insured *May lose value *Not financial institution guaranteed *Not a deposit *Not insured by any federal government agency. Advisory services may only be offered by investment adviser representatives in conjunction with an advisory services agreement and disclosure brochure as provided.