Should Your Minor Child Be Your Beneficiary?

Individual life applicants and group life participants often want to name their minor children as primary or contingent beneficiaries for their policies.  Over the years I’ve found myself suggesting that it’s better to choose someone who is an adult or to create a trust, but I couldn’t explain exactly why.

Today I had the pleasure to speak with Hyman Darling, the chair of the elder law and estate planning department at Bacon Wilson in Springfield and arguably the preeminent estate planner in Western Massachusetts.  Here is a link to his bio:

Hyman summed up the pitfalls of naming minor children beneficiaries quite simply: “They can’t get the proceeds because they are under 18, the court will have to name a conservator, it’s expensive, and the kids get all the money at age 18.”

He emphasized that the key is the stay out of the probate system, and the best way to do this is to create a trust for the benefit of the children.  “There are no court costs, no probate, and there is no accounting necessary.  In addition, the parents can specify the age that they want the children to receive the money.”

One concern I’ve heard in the past is that trusts cost money to set up.  While that’s true, the cost could be considered a small investment to make sure the death benefit proceeds are handled smoothly and in a manner that reflects the exact intentions of the parent.  Hyman recommends setting up an entire plan that consists of a health proxy, a will, a trust, and power of attorney.  “This plan,” he said, “will direct who controls health decisions, who controls financial decisions, and it will allow the life insurance proceeds to pass without probate.”

If you’d like to speak to Hyman or anyone on his team, you can call him at 413-781-0560.


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