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Choosing beneficiaries for your life insurance policy is an important decision. After all, they’re the ones that will receive money from your policy’s death benefit upon your passing. Therefore, it’s important to explore all your options and be selective about who you choose.
You may be thinking about naming your spouse or child as a life insurance beneficiary. Keep reading to find out how life insurance beneficiaries work, if your beneficiary can be a minor, and some alternatives, such as establishing a life insurance trust.
Put simply, a life insurance beneficiary is the person or entity you assign to receive your policy’s death benefit when you pass away. You may choose one beneficiary or multiple beneficiaries, depending on the policy. It’s your personal decision. Some examples of common life insurance beneficiaries you might want to consider include a partner or spouse, child, or charity.1
If you’re a parent, you should know that it’s possible to name a minor as your primary beneficiary, depending on your insurance company. But there may be some legal implications. Typically, an insurer won’t simply give your minor child the death benefit when you pass away. Instead, the court will likely need to appoint an adult custodian to manage the funds until the child becomes an adult. Unfortunately, this can be an expensive, time-consuming process. It might also mean that less money will be available to your child.2
Don’t wait until it’s too late. Help cover yourself and your family with coverage from Aflac.
Before you decide to name your minor child as a life insurance beneficiary, it’s a good idea to consider the benefits and drawbacks. If you do go this route, your child will eventually be able to use the death benefit as they need to. Once the funds are transferred to them, they can use it to help pay for health insurance, college, or everyday expenses. This can give them the financial help they need once they become a young adult.
The main disadvantage, however, is that your child won’t have access to the money until they turn 18 or 21, depending on your state. Keep in mind that the transfer process does not come cheap and can reduce the funds available to them. In addition, you lose control over who handles the funds, as the court will appoint this individual.2
If you determine it doesn’t make sense to name your child as a beneficiary, consider these alternative options:
With a life insurance trust, you’ll have more control because you’ll be able to specify how you’d like your death benefit to be distributed.3 For instance, you may state that a portion of the funds be distributed for your child’s college when they turn 18, and then at age 25, they can receive the remaining amount to use in any way they wish.
If you can, consider assigning your spouse or partner as the primary beneficiary. This way, they can continue to handle your household finances and save money for your child’s future. If both you and your partner or spouse pass away, the life insurance trust can kick in.3
The Uniform Transfers to Minors Act (UTMA) requires you to name a custodian to manage your child’s assets until they become an adult.2 Then, the assets will be transferred to your adult child, who may use the funds in any way they choose.
While you can appoint a minor child as a life insurance beneficiary, doing so isn’t always the best option. Luckily, there are several alternatives to consider, such as establishing a life insurance trust or creating a UTMA account.
Aflac offers a variety of life insurance policies that can financially help protect your children and other loved ones. You can customize your coverage to your needs, with premiums that can fit your budget. Start chatting with an agent to learn more about the plans we offer and get a quote today!
1 ValuePenguin - How to Choose a Life Insurance Beneficiary & How Claims Work. Updated January 10, 2024. Accessed June 18, 2024. https://www.valuepenguin.com/life-insurance/life-insurance-beneficiary.
2 LendEDU - Choosing a Life Insurance Beneficiary That is a Minor. Updated March 28, 2024. Accessed June 18, 2024. https://lendedu.com/blog/life-insurance-beneficiary-minor/.
3 Policygenius - Should I Name a Child as a Life Insurance Beneficiary? Updated August 17, 2023. Accessed June 18, 2024. https://www.policygenius.com/life-insurance/naming-a-child-as-a-life-insurance-beneficiary/.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, Aflac coverage is underwritten by American Family Life Assurance Company of New York.
Aflac life plans - 68000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. 65000 series: In Virginia, Policies ICC0965JTO & ICC0965JWO. B61000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B61JWO & ICC18B61JTO. In Delaware, Policies B61JWO, B61JTO. B60000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Q60000 series/Whole: In Arkansas & Delaware, Policy Q60100M. In Idaho, Policy Q60100MID. In Oklahoma, Policy Q60100MOK. Not available in Virginia. Q60000 series/Term: In Delaware, Policies Q60200CM. In Arkansas, Idaho, Oklahoma, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C. Not available in Virginia.
Aflac Final Expense insurance coverage is underwritten by Tier One Insurance Company, a subsidiary of Aflac Incorporated and is administered by Aetna Life Insurance Company. Tier One Insurance Company is part of the Aflac family of insurers. In California, Tier One Insurance Company does business as Tier One Life Insurance Company (Tier One NAIC 92908).
In AR, DE, ID, OK and VA: Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22. Aflac Final Expense policies are not available in New York.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations, and exclusions.
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