What Happens If A Minor Is A Named Beneficiary Of A Life Insurance Policy?

One of the main reasons that a family purchases life insurance is for the future financial security of your loved ones. When purchasing life insurance, you will be asked to name a beneficiary or multiple beneficiaries on the life insurance application. A beneficiary is your loved one who will receive your life insurance benefits upon your death. A named beneficiary can be any person or entity (spouse, children, siblings, parents, a trust, company, estate, charity, friend, etc.) who will receive all or a portion of the benefits from your life insurance policy. Oftentimes, a named beneficiary may be your child, even though your child is a minor. The age at which a minor becomes an adult is determined by each state.

If a policy owner names a spouse as a primary beneficiary, and their children (minors) as contingent beneficiaries, the life insurance benefits are payable to the spouse immediately at death. But what if the life insurance proceeds are payable to your minor child? In that scenario, the children are entitled to the life insurance proceeds but state and federal law may require the proceeds to be placed into a trust until the child reaches adulthood.  The life insurance funds would then become available to the child when the child becomes an adult. However, if a minor is listed as a primary beneficiary, it can make distributing the benefits challenging for your life insurance company because it cannot release the life benefits directly to minor children.

If a minor is listed as a primary beneficiary or contingent beneficiary and at the time of the insured’s death, a life insurance claim dispute may arise. This would cause the life insurance policy to go through interpleader to assign a guardian to manage the minor’s interests. This process is time-consuming and may be confusing and may even require attorney representation if the life insurance company has filed the minor’s claim in an interpleader lawsuit. An interpleader lawsuit can leave a minor with no financial support until the conclusion of the lawsuit, would require that the court to appoint a guardian that the insured did not want, and may not guarantee that the estate assets are handled in accordance with the insured’s intentions. Additionally, the interpleader suit allows life insurance benefits to be deposited with the court which may result in a child receiving less funds when they become an adult.

If you or a loved one have minor children that are entitled to life insurance proceeds, there are several things that you can do to ensure that your minor children receive the proceeds. Primarily, if your minor child is named in an interpleader lawsuit or a life insurance company instructs you to find an attorney to represent your minor child in a life insurance claim, you should contact an attorney immediately. Time is always of the essence. Often, beneficiary designations will prevail but there are certain circumstances and defenses where unnamed claimants may challenge the life insurance claim. If you are a minor, spouse, or guardian dealing with a beneficiary dispute, it is best to reach out to a trusted life insurance attorney for help.

Brochu Law, PLLC represents Military Lending Act cases on a contingency fee basis. There is no fee unless you win. We advance all costs on behalf of military families and consumers.

Brochu Law, PLLC represents military families and consumers nationwide*

*Disclaimer –Christopher J. Brochu, Esq. is licensed to practice law in the State of Florida. Brochu Law, PLLC works with co-counsel in accordance with state and federal law.