Can You Name Children As Life Insurance Beneficiaries?

Once you have chosen a life insurance policy, you must make the important decision of naming beneficiaries.  The most common beneficiary named, on average, is a spouse.  If there is no spouse, or you already have them named on another policy you may consider adding your child as a beneficiary.  But is this even an option?  In general, it is an option but it will vary depending on the insurer.

For Aetna Life Insurance specifically, they do allow children to be named as beneficiaries but there are some cases where the life insurance proceeds will not be paid directly to your child.  They will be unable to pay the proceeds to your child until the earlier of;  the date that your children reach the age of majority which is typically 18 or 21, depending on the state, or the date that the legal guardian of the minors' estate has been appointed by the appropriate court.  According to the Aetna website site, this appointment process can cost a lot of money and state laws could limit who is named as the guardian of the estate.  Usually, a guardian of the minors' estate can hold funds until the child reaches age 18 or 21.  This could ultimately cause some unnecessary confusion and controversy.

With that said, there are many cases where the children receive the funds and it is in their best interest.  Another alternative to naming a minor child is to establish a Trust that can receive and manage the life insurance funds on behalf of the child.  For this circumstance, you would actually name the Trust as the beneficiary.  If you really want your child to receive the life insurance proceeds, it's best to talk to a lawyer or legal advisor about they best route to take to ensure this happens smoothly.  With state laws varying greatly, you want to ensure you have the proper advice to accomplish your goals.