Minor as Beneficiary of Life Insurance Policy
Naming a minor as beneficiary of a life insurance policy is a bad idea. State law generally prohibits direct receipt by minors of life insurance death benefit payments. If a minor somehow ends up listed as the beneficiary of a life insurance policy, the minor's legal guardian determines how the money is managed and spent until the child reaches the age of majority. The age of majority differs by state. If the minor does not have a legally establihed guardian, the state will appoint one. State appointed guardians typcially have no personal connection to the child. Involvement of a state-appointed guardian could tie the funds up for a long time (several years) and costs mnoney.
Some ways to ensure a child benefits from a life insurance payment:
A. Identify an adult who can be listed as beneficiary and trusted to use the proceeds for the benefit of the child
B. Appoint a legal guardian for the child
C. Set up a Uniform Transfers to Minors Act (UTMA) account with the insurance company specifying an adult custodian
D. Set up and designate a Trust as the beneficiary of the life insurance policy proceeds. Detailed instructions can be provided to Trustee(s) regarding disbursement of funds for the benefit of the child and when direct control may be transferred to the child (presumably when the latter reaches at least the legally recognized age of majority in that state).
New York Life Blog: https://www.newyorklife.com/groupmembership/minors-as-policy-beneficiaries
I thank Eleanor Akers for research on this topic.