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Big Mistake: Naming A Minor A Beneficiary


By Phil Rarick, Miami Trust Attorney

Naming a minor child as a beneficiary of a will, life insurance policy, IRA, 401K, bank account or any other source of fund is almost always a substantial mistake for four reasons:

  1. If the funds are over $15,000 a guardian ad litem may need to be appointed by the court for the minor to access the funds upon death or disability of the parent. See F.S. 744.301. Court costs to petition the court and secure such funds on behalf of the minor could estimate from $3,000 to $5,000.
  2. Upon reaching the age of 18 the minor becomes of legal age and can immediately claim all funds. Therefore, if the goal was to set aside the funds for the child’s education, then these funds are likely lost. How many 18-year-olds have the money management skills to handle any significant sum of money? Would they use the funds for college tuition – or purchase a bright yellow Mustang?  You may think your child is the exception, but do you really want to take this risk?
  3. After age 18, the funds can be attacked by creditors of the child.   Let’s say the child gets an American Express card and maxes out the credit card.   American Express could have a claim on your adult child’s inheritance.
  4. If distributed at age 18, the funds will be considered as available funds for any financial assistance or scholarship the adult child seeks for college or university entrance.  In a properly structured trust, the funds would not be factored into such need based financial assistance.

Much Better Options

  1.    Prepare a Protective Educational Trust or Safe Harbor Trust For Minors as part of your revocable living trust or in a separate irrevocable trust. Such Trusts would allow you to appoint a person you trust to act as a trustee for any monies you intend to go to your minor children or grandchildren.  These types of Trusts can also help ensure that every dime is used for the benefit of your child – and no one else.   See our Quick Reference GuideUnderstanding Living Trusts For Florida Residents.
  2.    Do not name minors a primary or contingent beneficiary of life insurance.We see clients often get poor advice from life insurance agents on this point. For married couples, it is popular to name the other spouse as primary beneficiary and children as contingent beneficiaries. If the spouse does not survive, and the funds go to the minor children, you have all the four problems mentioned above.  Rather, consider a revocable or irrevocable trust that names your children as beneficiaries and provides guidelines for when the funds can be distributed.   Trusts come in thousands of different variations – consult a Miami trust attorney to help you decide how best to structure the trust.
  3.    Do not use Uniform Gift To Minor Accounts or UGMA accounts – except for small sums under $1,000. These accounts are overused. The beneficiary of a UGMA (Uniform Gift to Minor Account) can receive the entire sum at age 21.  These funds are much better protected if they flow into a trust.

For more information about protecting funds for your minor children, contact an attorney at Rarick & Bowden Gold at (305) 556-5209 or As Miami trust attorneys, with over 60 years of collective experience, we welcome the opportunity to meet with you and discuss your best legal options.

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