Why You Should Never Name Minors as Your Beneficiaries.

Most parents want to pass their assets to their children or grandchildren but naming a minor as a
beneficiary can have unintended consequences. It is important to do some estate planning to
avoid leaving assets directly to a minor.

There are two main problems with naming a minor as the beneficiary of your will, life insurance
policy, annuity, IRA or retirement account. The first is that a large sum of money cannot be left
directly to a minor. Instead, a Pennsylvania Orphan’s court will likely have to appoint a
guardian over the estate of the minor to hold and manage the money. Your Estate will have to
pay attorney fees to handle the guardianship proceedings to appoint the guardian, and the
guardian may not be someone you want to oversee your children’s money. The Guardian of the
Estate will have to file annual accountings with the County Orphan’s court, generating more
costs and fees to your Estate.


The other problem with naming a minor as a beneficiary is that the minor will be entitled to the
funds from the Guardian when he or she reaches age 21. There are no limitations on what the
money can be used for, so while you may have wanted the money to go toward college or a
down payment on a house, your child may have other ideas. 


One way to get around these problems is to create a pour over trust in your will and name the
minor as beneficiary of the trust. A trust ensures that the funds are protected by the trustee until
a time when it makes sense to distribute them. Trusts are also flexible in terms of how they are
drafted. The trust can state any number of specifics on who receives property and when,
including allowing you to distribute the funds at a specific age or based on a specific event, such
as graduating from college. You can also spread out distributions over time to children and
grandchildren. 


If you do create a trust, remember to name the trust as beneficiary of all your life insurance, IRA,
annuity or retirement plans. For example if the minor’s name was John Smith, you would have
language that states “In Trust for John Smith under my will dated August 20, 2020, and as the
same which maybe superseded or amended by a later will.”
If you forget to take that step, the money will be distributed directly to the minor when he or she
turns 21, negating the work of creating the pour over trust in your will. If you have any
questions or need help with your estate plan, call Gregory J. Spadea at 610-521-0604.

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