Have Kids? How to Designate Them as Beneficiaries on Your Life Insurance Policy


Naming your children as beneficiaries on your life insurance policy is more complicated than you think. I bring this up because I didn’t know how this worked when my husband I first purchased life insurance. If I hadn’t done some homework, we could have ended up having the life insurance proceeds land in our estate, should we both die at the same time. We had only named a primary beneficiary on each of our policies. If the proceeds went to our estate, it would have meant a long drawn out process to have the funds be available to financially help the kids.

There are several ways to name your children as beneficiaries. The way you chose to do this can have a significant impact on how the proceeds of your life insurance policy are paid out, intended or unintended.

  • If your children are under the age of 18, they are considered minors. Did you know minors have no legal rights? If you name them as a primary beneficiary without a guardian in place, payouts will not occur, until a guardian is named. Setting up a guardian arrangement requires legal work (expense) and can take time (not optimal if the payout is needed immediately).
  • I would suggest a better plan would be to name your spouse as primary beneficiary and name your children as contingent beneficiaries (with a named guardian or trustee). This protects you in two ways:
  1. In the event your spouse survives you, he or she will retain complete control over the payout with no legal hold ups
  2. If both of you are survived by the children, the payout goes immediately to the children by way of guardian or trustee.
  • Setting up a trust allows you to customize how the payout should occur and doesn’t require following legal processes associated with guardianship.

Each situation is unique and that’s why we are here. We can help you structure the right beneficiary designations on your life insurance policy to meet your specific needs.

About the author:  Michele Cleary has been in the business for over 35 years and holds a CLTC designation. She believes that life insurance can give you and your family peace of mind, especially when you have other things to worry about. Michele now has 4 grown children and knows that proper planning is essential. You can reach her at 1-800-651-1953 or MCleary@Pivot.com.