Who manages life insurance money left to minor children beneficiaries?

Mudbugger40 asked...

If minor children are left as beneficiaries of insurance policies, who would manage their money?

Expert Answer

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.

The life insurance proceeds left to a minor child who is a beneficiary of a life insurance policy are managed on behalf of the child by the child's guardian or parent until the child reaches the age of eighteen -- at which time any remaining funds must be turned over to the child.

Many people are hesitant about having a child of eighteen receive substantial amounts of money due to concerns that they will not properly manage the funds. This is why many people leave their life insurance proceeds to a trust for the benefit of the minor child. A trust can be tailored to your specific desires as to when you would want the child to have full access to the life insurance proceeds. During the time that the proceeds are held in the trust, the trustee can be given the ability to expend principal and income from the trust for the benefit of the minor child. The duration of the trust can be to whatever age you believe would be appropriate for the child which can be well beyond the child's eighteenth birthday. It is not unusual for such a trust to manage the funds until the child reaches age twenty-five or even older. However, in order to have this as an option, the trust must be in existence before the insured person dies and the trust must be specifically designated as a beneficiary on the life insurance policy's beneficiary designation statement.