A. Naming minor children as primary or contingent beneficiaries might cause a problem because insurance companies cannot pay out proceeds directly to children until they reach the age of majority, typically 18 to 21 depending on state law.
In most jurisdictions, to protect the interests of a minor, state law requires appointment of a guardian or trustee to administer proceeds payable to the child. However, appointment proceedings will delay access to the death proceeds and generate unnecessary legal and administrative expenses. Therefore it is important to name a guardian of your children in your will.
If you do not name any contingent beneficiary of your life insurance policy, it is the same as naming the insured's estate as the beneficiary. In the absence of a Will designating a guardian or trustee the courts will intervene, which may cause long, frustrating delays.
In our next blogpost, we will discuss 3 practical ways to ensure that minors, through people entrusted with their care, have access to the life insurance proceeds intended for them.