Life Insurance Beneficiaries and Minor Children: Getting the Designations Right
Naming a beneficiary seems simple, until a beneficiary is a minor, a former spouse, or no longer living. Here is how primary and contingent beneficiaries work, why minors can't receive proceeds directly, and the common mistakes.
Your life insurance beneficiary designation decides who receives the death benefit, and it usually overrides your will. A designation that's outdated, incomplete, or names a minor child directly can delay payment, send money to the wrong person, or put proceeds under court supervision.
The short version
- Name primary and contingent beneficiaries, with percentages that add to 100%.
- Minor children generally can't receive proceeds directly. Without planning, a court may need to appoint someone to manage the money.
- Common solutions include naming a trust, or a custodian under your state's transfers-to-minors law.
- Beneficiary designations usually override wills. Review them after marriage, divorce, births, and deaths.
- Naming your estate can send proceeds through probate and expose them to creditors.
Primary and contingent beneficiaries
| Role | Who gets paid |
|---|---|
| Primary beneficiary | First in line |
| Contingent beneficiary | Paid if no primary beneficiary is living or able to receive |
If no named beneficiary survives you, proceeds typically go to your estate.
Per stirpes vs. per capita
If a beneficiary dies before you, what happens to their share?
- Per stirpes: their share passes to their descendants.
- Per capita: their share is generally divided among the remaining named beneficiaries.
A hypothetical example: you name three adult children equally. One dies before you, leaving two children.
Show the numbers behind this chart
| Per stirpes | Per capita (among surviving named beneficiaries) | |
|---|---|---|
| Surviving child A | $100,000 | $150,000 |
| Surviving child B | $100,000 | $150,000 |
| Grandchild 1 | $50,000 | $0 |
| Grandchild 2 | $50,000 | $0 |
Why minors are a problem
Insurers generally won't pay life insurance proceeds directly to a minor. If a minor is named outright with no arrangement in place, a court may appoint a guardian or conservator of the property to manage the money, which can involve cost, delay, and ongoing court oversight. Funds may also go to the child outright at the age of majority.
Common alternatives:
- A trust named as beneficiary, with a trustee you choose and rules about how money is used and when the child receives it. An estate planning attorney can set one up.
- A custodian under your state's Uniform Transfers to Minors Act (or similar), where permitted by the insurer. The child typically gets control at an age set by state law.
- Naming an adult to use the money for the child is common but informal; that person has no legal obligation to do so.
Common mistakes
- Not updating after divorce. In some situations a former spouse can still receive proceeds. State law and the type of plan matter, and employer plans can follow federal rules.
- Naming the estate. Proceeds may go through probate.
- No contingent beneficiary.
- Unclear names, like "my children," without specifying how to handle future children or stepchildren.
- Forgetting group life at work, which has its own beneficiary form.
A checklist
- Review every policy, including any group life coverage through work.
- Name primary and contingent beneficiaries with percentages.
- Use a trust or custodian arrangement for minors.
- Choose per stirpes or per capita deliberately.
- Update after any major life event.
- Keep confirmation from the insurer that changes were recorded.
The takeaway
Beneficiary designations decide where life insurance money goes, usually regardless of your will. Name primary and contingent beneficiaries, avoid naming minors outright, and review designations after every major life change.
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