Don't Name Your Child as a Life Insurance Beneficiary. Here's What to Do Instead

When you become a parent, filling out the life insurance beneficiary form feels easy. Who should get the money if something happens to you? Your kids, obviously. But that obvious answer can tie the money up in court at the worst possible time.

Here's the fast answer: don't name a child under 18 directly as your life insurance beneficiary. Insurers generally can't pay large sums to a minor, so a court may have to appoint someone to manage the money, which can mean delays and legal costs. Instead, name the adult you've chosen as your children's guardian, set up a trust, or name a custodian for your child.

Cassi Benavides, founder of Nest & Navigate, flagged this mistake when we sat down with her. Through Nest & Navigate, Cassi gives new families white-glove, one-on-one guidance as their personal benefits advisor, drawing on 13 years in HR and benefits management. You can watch the full conversation on YouTube.

Your 30-second cheat sheet: life insurance beneficiaries and kids

Avoid

• Naming a child under 18 directly as a primary or contingent beneficiary.

Better options

• Your spouse, if you're married.
• Your children's guardian, the adult you've named in your will.
• A trust that holds the money for your kids.
• A custodian for your child, if your insurer allows it.

Review whenever

• You have a baby, marry, divorce or name a new guardian.

TL;DR: Leave the money to a trusted adult or a trust for your kids, not to your kids directly.

What happens if you name a minor as your beneficiary?

"Do not put a child under the age of 18 as a beneficiary because they can't legally be given the money until they're an adult."

That's Cassi's warning, and it matches what insurers and estate planners say. Insurance companies generally won't pay large sums directly to a minor. Instead, a court may need to appoint a guardian to manage the money, which can bring delays and extra costs.

There's a second problem. Once your child reaches adulthood, which is 18 or 21 depending on your state, the money can be turned over to them with no strings attached. Few parents want a teenager getting a large check with no guidance.

Cassi says this comes up most often for parents who aren't married, are divorced or have a partner rather than a spouse, because naming the other parent may not be an option.

TL;DR: A minor beneficiary can mean court involvement now and an unrestricted payout at 18 or 21.

What should you do instead?

You have a few options, and the right one depends on your family.

• Name your spouse. If you're married and trust your spouse to provide for the kids, this is the simplest route.
• Name your children's guardian. Cassi's suggestion is to name the person you've chosen as guardian in your will, so the money goes to whoever is raising your kids.
• Set up a trust. If it's important that the money goes to your children, Cassi says you need a trust. A trust lets you decide when and how your kids receive the money, and you name the trust as beneficiary.
• Name a custodian. Some insurers let you name a custodian to manage the money for your child under your state's Uniform Transfers to Minors Act.

TL;DR: Name your spouse, your kids' guardian, a trust or a custodian, depending on how much control you want.

How do you set up a trust without spending a fortune?

Check whether your employer offers a group legal plan. You pay a small monthly premium through payroll, and covered matters with a network attorney, including wills and estate planning, come with no copays or deductibles. Cassi calls it the cheapest way to get a trust or full estate plan, and some people enroll for one year, get their documents done and cancel.

At minimum, Cassi says new parents need a basic will that names a guardian. Some EAPs and life insurance benefits include one. Read our guide to perks hiding in your benefits for more.

TL;DR: A group legal plan is often the cheapest way to set up a trust, and a basic will is the minimum.

Which other accounts need a beneficiary check?

Life insurance isn't the only form. Your 401(k) and your HSA have beneficiaries too, and the same minor rules can apply. If you're growing your HSA as a long-term account, log in to your HSA provider and check who's listed. Caeli pairs every itemized receipt with any LMN in one record, so whoever inherits or manages your HSA has the paperwork too.

And after any big change, especially a divorce, Cassi says to check whether you need to update your beneficiaries.

TL;DR: Check beneficiaries on life insurance, your 401(k) and your HSA after every big life change.

Caeli Pro-Tip: Updating your beneficiaries is a good moment to get the rest of your benefits paperwork in order. Install Caeli and every HSA or FSA purchase you make gets flagged at checkout, with itemized receipts paired with any LMN in one record. If your family ever needs to sort out your accounts, the records are already there. Install Caeli.

Frequently asked questions

Can I name my child as my life insurance beneficiary?

You can, but it's not recommended if they're under 18. Insurers generally can't pay a minor directly, which can mean court involvement and delays.

What happens to life insurance if the beneficiary is a minor?

A court may appoint a guardian to manage the money until your child is an adult, and then the funds may pass to them with no restrictions.

At what age can a child receive life insurance money directly?

Generally at 18 or 21, depending on state law.

Who should I name as beneficiary instead of my minor child?

Your spouse, your children's named guardian, a trust or a custodian under your state's Uniform Transfers to Minors Act.

Do I need a lawyer to set up a trust for my kids in 2027?

Usually, yes. A group legal plan through your employer can be the cheapest way to get one.

Should I update my beneficiaries after a divorce?

Yes. Check every policy and account, including life insurance, your 401(k) and your HSA.

The bottom line

Naming your kids feels like the loving choice, but it can tie up the money they'd need most. Name a trusted adult or a trust, and recheck every form after a big life change. For more on protecting your family, read our guide to open enrollment for new parents, or book a free consultation with Cassi.

This article is for education only and isn't tax, legal or financial advice. Estate and beneficiary rules vary by state, so talk to an attorney about your situation.