4 Reasons Why Naming a Minor as a Beneficiary of Your Will, Trust, or Other Financial Account is a Bad Idea

As a parent, you likely want to provide for your children or grandchildren in your estate plan. When you begin the process of estate planning, these individuals often may be minors. The question becomes how to achieve your estate planning goals in terms of sufficiently providing for your children while still avoiding the pitfalls that can come with naming a minor as a beneficiary of your will, trust, or other financial accounts. A Florida estate planning lawyer at Kramer Green can help you put together an estate plan that safeguards your objectives and minimizes the risk that involving minors in estate planning can involve.

  1. If a minor child receives more than $15,000 from an estate, trust, life insurance policy, annuity contract, or other benefit plans, a guardianship of the property and, in some cases, the appointment of a guardian ad litem to protect the child’s interests is required under Florida Statutes §744.301 and 3021. The money is placed in a restricted account, and the child’s parent or another guardian whom the court appoints must get court permission to withdraw and disburse the funds for any purpose.

A court proceeding necessarily slows down the disbursement of funds and can be quite time-consuming, depending on the situation. This process also can be expensive, as fees for an attorney to file the guardianship and pay the guardian ad litem, if required, will likely come out of the funds left to the child. Therefore, avoiding naming a minor as a beneficiary can be a way to preserve funds for the child and eliminate delays in getting those funds to the child.

The same consequences occur from naming a minor as a beneficiary of your life insurance policy or IRA. The life insurance or financial services company typically will not pay the funds out to a minor as a beneficiary of the policy or account. Instead, the funds will pay out to a natural parent, and if there is no surviving natural parent or the funds are over $15,000, the court will have to appoint a guardian to receive the funds on behalf of the minor child.

  1. Once the child turns 18, he or she could have access to a large sum of money all at once. Unfortunately, most 18-year-olds are not wise about investing for their futures or saving money. As a result, they may spend the money inappropriately instead of using it for college or a down payment on a home, as the grantor intended. This situation can undermine your efforts to name the minor as a beneficiary of your estate or other inherited funds.
  2. The funds could adversely affect the child’s eligibility for need-based financial aid to attend college. If the funds belong solely to the child, the college will consider them a resource available to help pay for college. Therefore, a minor who is named as a beneficiary of these funds may be denied need-based financial assistance to which he or she otherwise may be entitled.
  3. Once the child turns 18, the funds become subject to the child’s creditors immediately. If the child opens a credit card at age 18 and fails to pay the balance, he could face a lawsuit and judgment against him. The credit card company then could access the funds in his bank account to pay the judgment.

Call Us Today for Assistance with Naming a Minor as a Beneficiary

For assistance from an experienced estate planning attorney, look no further than Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. We offer comprehensive estate planning services. However, we also offer the full range of estate, probate, and related services when your loved one passes away. We are here to help your family navigate the complex legal problems that often arise after losing a family member in the most efficient manner possible. Call us at (954) 966-2112 or find out more about our legal services online. Set up a time to talk to us about your legal needs today.

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