Use of Life Insurance Inheritance by a Minor

Question About: Use of Life Insurance Inheritance by a Minor

My son, who is now 10 years old, was left a life insurance policy from my father. We are at a point of losing our home, and I need to find out if we can draw funds against that policy to get us out of this nightmare.

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Steve Weisman

Expert Answer by Steve Weisman

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Steve Weisman hosts the nationally syndicated radio show A Touch of Grey, heard on more than 50 stations, including WABC in New York City and KRLA in Los Angeles. He is a practicing lawyer specializing in estate planning and is admitted to practice before the United States Supreme Court. He's a public speaker and commentator who has appeared on many radio and television shows throughout the country, and he's the legal editor of Talkers magazine, the preeminent trade publication of talk radio. His latest book is The Truth About Avoiding Scams.

I assume from your question that your ten year old son was named as the beneficiary of your father's life insurance policy rather than having a trust with your son as the beneficiary of the trust be designated as the beneficiary of the life insurance policy.

In this case because your son is a minor, his guardian is charged with the duty to manage the funds on his behalf. Your situation presents a critical question as to a potential conflict of interest. While it is certainly in your son's best interest to continue to be able to live in your home, to apply some or all of the life insurane proceeds toward preserving an asset that is not owned by your son would not be considered to be to his financial benefit.

However, it may be possible for you to borrow the money from your son at a reasonable interest rate. It would be advisable if you were to consider this as an option to get court approval for this loan.