Are you supporting the church or charity currently? Because you could certainly imply that the death would financially hurt them due to no longer being able to donate to them.
Owners, Beneficiaries, and Insureds
- Thread starter theinsuranceman
- Start date
- 5,050
I have not seen this to be true. While it is ideal to name a trust instead of minor beneficiaries, if the client had no trust it is perfectly fine to name minors. Naming someone else who may care for them or be the guardian will not legally obligate the person to use the money for the minor & it can expose the money being lost due to lawsuit, bankruptcy, divorce or excessive spending for whatever the person chooses. It alsoo exposes the person to owing gift taxes if they give the child more than the gift tax laws allow.
Naming the minor is allowed & at least forces the money to have annual oversight by the courts with the person or guardian they appointed giving an annual audit of the status of funds & how any was spent.
If the carrier permits the beneficiary to be stated as "Custodian X for the benefit of minor children A,B,C" that can be done as it falls under the Uniform Gifts to Minors acts & processes but many carriers wont do this. they merely have you name a specific person & that can be a problem
Again, if owner is single parent, best to have a trust. But if they don't have a trust, I would not hesitate to name a minor directly compared to naming another person
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- 4,306
While I have occasionally named minors as benes due to the parent's insistence, I always recommend against it. It can cause problems at claim time.
- 5,050
Agree, but can I ask what you do to avoid all the other potential issues of naming another person who may or may not use the proceeds as intended. are you able to label the beneficiary with restrictions or how they must use the proceeds.
- 2,387
This is absolutely correct.
- 4,306
On a younger age FE case, I usually just ask, "Who would be likely to handle your funeral arrangements?" Then I encourage them to name an adult they trust. Sure, there's a chance that person won't do right, but they usually name their mom, or some other respected family member. In 30 years, the only time I've encountered a problem involving a beneficiary at claim time is when another family member, who is not the beneficiary, tries to pull some shenanigans (which never work, it's just a PIA to have to deal with it.)
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- 5,050
i can possibly see that in the FE case where they are small face & main reason for the policy is to pay funeral home, etc. But in cases of income protection of $250k, $500k or more I would definitely rather have the court have oversight for a minor than to risk naming another person directly unless you can tie their hands some how in the wording of the bene designation as "custodian for" or something.
You certainly can name a minor beneficiary.. at least in TN .. I have done so many times even though I advised against it...If the beneficiary is a minor then a court will have to name a guardian or custodian for the minor to oversee the money.
The beneficiary is required to have an insurable interest at the time of issue. Companies will refuse to issue a policy if there is none. It is generally thought that once a policy is issued, the owner can name whoever they want as they own the policy. One way around the insurable interest is to name the estate the beneficiary since a person has an unlimited interest in their own life. Then, they can bequeath the money to whomever they please. Another is to name a trust as the beneficiary and have the trust payable to the person or entity they desire.
- 5,050
I assume you mean estate of insured, not estate of beneficiary as naming the estate essentially means "no beneficiary". I try to suggest estate almost never for at least the following 3 reasons
1. forces it to go to probate with the possible added delays & costs
2. in probate, Creditors are 1st in line to get paid where creditors would have never come into play had named individuals been the beneficiary. even clients with no mortgage or credit card debts can end up with sizeable debts at death from end of life medical bills, care, etc.
3. With a Will or no will, it can be contested & drag on.
But I get your point that if someone has no trust or no relatives they want to name directly as beneficiaries, estate might be OK. I have just seen way too many death claims go to probate that never should have because the agent 1 year ago or 30-50 years ago submitted the app with "estate of insured" under the plan to put the correct beneficiaries in a few weeks when the client supplied the data on the named beneficiaries. Even worse are the cases where agents go back for a new sale & dont assist the client to update old policy beneficiaries at same time they are writing the new case with proper current beneficiaries.
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