August 13, 2015
Naming a minor as a beneficiary brings up a major concern.
If parents or grandparents make a child a primary or contingent beneficiary of an insurance policy, IRA or investment account, they should be aware that most policies and investments will not directly transfer to a minor. They need to be received by a court-approved roperty guardian, a trustee of a children’s trust, or a
revocable living trust beforehand.1
State laws prevent children from receiving large lump sums.
They commonly prohibit minors from owning real property worth more than $2,500-5,000 (the limit varies per state) or receiving cash inheritances greater than that. It is incredibly rare for insurers to distribute life insurance proceeds to minors.1,3
As for POD checking and savings accounts and CDs, banks will usually allow the child or the child’s parent(s) to receive sums less than the aforementioned limits. For arger sums, the parent(s) will likely have to turn to a court and ask to be appointed guardians for the money if no property guardian, children’s trust or revocable living trust is in place.2
A personal guardian is not always a child’s property guardian.
Usually, one person serves as both – but if that person lacks financial literacy or accountability, another property guardian may need to be appointed to manage assets for the child until the child turns 18. If that is desired, a court must review the choice of guardian and the inherited assets will be probated.3
How may circumstances like these be avoided?
Parents or grandparents would be wise to consider three options:
Naming a minor as a beneficiary means recognizing certain factors.
Financially speaking, if you fail to appoint a trustee or a property guardian for a minor through your will or living trust, then you are leaving it open to the courts to decide who that trustee or guardian may be. So it is vital to address these matters. As one or more children approach legal age, terms of your will or revocable trust need to be reviewed and possibly changed as well.**
Heather Croke* may be reached at 952.841.3013 or hcroke@BoulayGroup.com. www.BoulayGroup.com
*Investment Advisory Services offered through Boulay Financial Advisors, LLC a SEC Registered Investment Advisor. Certain Third Party Money Management offered through ValMark Advisers, Inc. a SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC 130 Springside Drive, Suite 300 Akron Ohio 44333-2431* 1-800-765-5201 Boulay PLLP and Boulay Financial Advisors, LLC are separate entities from ValMark Securities, Inc. and ValMark Advisers, Inc.
**This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – wellsfargo.com/retirementplan/financial_matters?page=name-ben [5/20/15]
2 – nolo.com/legal-encyclopedia/free-books/avoid-probate-book/chapter1-4.html [5/20/15]
3 – thismatter.com/money/wills-estates-trusts/minor-children.htm [5/20/15]
4 – tinyurl.com/kg5rdtx [5/20/15]
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