Last week I sent out a video about choosing beneficiaries for your life insurance and which mistake to avoid (it’s here if you missed it). The big mistake I discussed is naming a minor child as a beneficiary to your insurance policy. The reason being is that minors cannot own property until they are 18. People often choose their children as a secondary beneficiary after their spouse.
Now a lot of people blow off this type of mistake because “that will never happen to me” or “nothing bad will ever happen to me.” I’ve certainly been guilty of the same thinking in the past until I had a personal wake up call.
Last week after I sent out that video, I was in Probate court, and sure enough, the matter before mine was the estate of a man who had been recently killed in a car accident. He had named a minor child as a beneficiary of his life insurance. Either the child’s mother or step-mother was in court before the judge, pleading to be the guardian of the child’s property.
The judge refused the request, and instead appointed a third-party guardian, who will be deciding how the child’s money will be spent until he is 18 or 21. The third-party guardian will also be collecting $125/hr for her services until the child is an adult!
Bad things do happen to good people! If you’ve named your minor child as a beneficiary to your life insurance, it might to be time to rethink that strategy. If you have any questions, send me an email at firstname.lastname@example.org.
P.S. We’ve released our Special Needs Freedom Guide for parents with special needs children. Get access to it here. If you know somebody who might benefit from the Guide, please pass it along.
Colin Ley is a Seattle estate planning attorney. He is also the co-founder of LayRoots along with his wife, Shreya.