The significant exception to the rule of not naming a minor as a beneficiary is trusts: you can name a legal minor as the beneficiary of a trust. That’s important because if you want to leave assets to a minor, a trust is the way to do it.
Yahoo Finance’s recent article entitled, “Can I Name a Minor as a Beneficiary?” points out that it’s important to know that property and estate laws are highly state specific. Therefore, consult a local attorney before making any decisions regarding your money and estate planning.
Several legal documents can name someone as the beneficiary of any underlying assets. A beneficiary is the third party who receives some benefit from the document, typically in the form of financial or other property assets.
Four primary types of documents can name a beneficiary when it comes to estate planning:
- Wills: In a last will and testament, a beneficiary is the person the will names to receive assets from your estate.
- Life Insurance: Here, a beneficiary is an individual who receives a payment from the life insurance policy after the policyholder's death.
- Retirement Accounts: A beneficiary in a retirement account is someone who receives the assets in the account after the death of the account holder.
- Trusts: In a trust, a beneficiary gets assets from the account based on the terms of the trust and the trustee’s management.
Under most circumstances, a minor can’t receive assets as a beneficiary. The major exception to this is also trusts. Minors can be named as beneficiaries of a trust because the beneficiaries of a trust don’t participate in contractual or financial transactions.
Because minors cannot participate in financial transactions or handle legal matters, they can’t get assets through contracts and legal documents. They can’t directly inherit through a will, nor can they receive assets through a contract, such as a life insurance policy or a retirement account.
Empower yourself by taking proactive measures to protect your assets and ensure the future well-being of your loved ones, including minors. By booking a call with us today, you can gain insights tailored to your unique circumstances and make informed choices that will shape the legacy you leave behind. Let us guide you through the intricacies of estate planning, so you can secure a brighter tomorrow for your beneficiaries.
