Beneficiaries✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Why do insurance professionals usually discourage naming a minor child as the direct beneficiary of a life insurance policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A minor lacks the legal capacity to receive and manage an insurance death benefit directly. If a minor is named as beneficiary and the insured dies, a court typically must appoint a guardian or conservator to hold the funds until the minor reaches majority, adding expense and delay and limiting how the money can be used. Alternatives such as naming a trust or a custodian under the Uniform Transfers to Minors Act provide managed and flexible control. Minors may be named, but the practical and legal consequences make alternative arrangements preferable.
Why the other options are wrong
- B) Minors can legally be named as beneficiaries. The issue is not eligibility but the practical and legal handling of payment to a minor.
- C) Proceeds remain income-tax-free under IRC Section 101 regardless of the beneficiary's age. Guardianship, not taxation, is the concern.
- D) Naming a minor has no effect on the policy's validity or duration. The policy does not lapse at the minor's 18th birthday.
Memory hook
Minors cannot sign for money; a trust or custodian keeps the check out of court.