Can a Minor Be a Life Insurance Beneficiary? What You Need to Know About Denials, Delays, and Disputes
Life insurance claims are often more complicated than they seem. What should be a straightforward process—collecting benefits after a loved one passes—can quickly turn into a web of denials, delays, and unclear answers. Sometimes the issue is something minor, like an error in the policyholder’s application. Other times, it involves bigger questions, like whether the death occurred before the policy took effect or within the contestability period.
But when the designated beneficiary is a minor, things can get even more complicated. Insurance companies often impose strict requirements before releasing funds to children, and if any detail is out of place—legal, procedural, or financial—it can result in a denied or disputed claim. In some cases, we even see insurers delay payouts indefinitely or initiate interpleader lawsuits when a minor is listed, especially if conflicting documents exist.
Here’s what you need to know if you're setting up a minor as your beneficiary—or if you're facing a claim denial because a minor was named.
Why Minors Can’t Directly Receive Life Insurance Benefits
In nearly every state, individuals under the age of 18 (or 21 in some jurisdictions) cannot legally manage significant financial assets. That means even if a child is named as a beneficiary, the insurance company won’t pay the death benefit directly to the child. Instead, they’ll require that a custodial arrangement or trust be in place to manage the funds on the child’s behalf until they reach legal maturity.
If no such arrangement exists, the insurer may delay the payout—or worse, deposit the money with the court and file a life insurance interpleader action, forcing family members to fight over who should manage the funds. We've seen many families blindsided by this legal maneuver, especially when no guardian or trustee was appointed in advance.
Custodial Accounts and Guardianships
If you plan to name a minor as your life insurance beneficiary, it’s crucial to also designate a custodian or establish a custodial account under the Uniform Transfers to Minors Act (UTMA). This ensures the funds are held in a managed account until the child reaches adulthood, with a trusted adult handling financial decisions in the meantime.
Without a designated custodian, the probate court may have to step in to appoint a guardian of the estate—which can lead to delays, legal fees, and even disputes between family members over who should control the money.
Creating a Trust for a Minor Beneficiary
Many policyholders opt to set up a trust to ensure greater control over how and when the life insurance money is distributed. A trust allows you to:
Appoint a trustee to manage the funds
Set specific terms (e.g., only allow access for college, housing, or medical expenses)
Decide when the minor will receive full control (e.g., at age 25 instead of 18)
Avoid probate court involvement altogether
If structured properly, a trust can prevent disputes, delays, and denials. However, if the life insurance beneficiary designation conflicts with the terms of the trust—or with your will—it may trigger a legal challenge or delay in payment.
Disputing Minor Beneficiaries After Death
In some unfortunate situations, life insurance disputes arise after the policyholder has died, particularly when a minor is named and there’s disagreement about how the funds should be handled. We’ve handled many cases where a minor beneficiary designation was challenged by a surviving parent, estranged family member, or even another named beneficiary who claimed the funds were not meant for the child directly.
Insurance companies often file interpleader lawsuits in these situations to avoid liability. They’ll deposit the funds with the court and let the family members and their attorneys fight it out. If you’re in the middle of a dispute involving a minor beneficiary, it's essential to have a life insurance attorney who can intervene early and protect your rights.
What If the Policy Lists the Wrong Age for the Beneficiary or Policyholder?
Another common reason for denial is incorrect information on the life insurance application—particularly related to age. Life insurers base premium rates on the insured’s age, and if the policyholder lists the wrong birthdate, the insurer may argue that the policy was issued under false pretenses.
Even honest mistakes can result in denied claims if the insurer alleges that the correct age would have resulted in a higher premium. If the discrepancy is caught after death, the insurer may attempt to void the policy entirely.
Similarly, errors in the age or identity of the minor beneficiary—misspelled names, incorrect dates of birth, or conflicting legal documents—can lead to serious complications, including delays or outright disputes about who is entitled to the funds.
Preventing Conflicts Between Beneficiary Designations and Your Will
It’s critical that your life insurance policy, will, and any trust documents all align. For example, if your will states that a relative should receive your life insurance money but your policy names your child as the beneficiary, the insurance company will follow the policy—not the will.
Conflicting documents create confusion and can delay payment or prompt legal action. A life insurance lawyer or estate planning attorney can help ensure that your documents are coordinated and legally sound—reducing the likelihood of complications down the road.
We Help Resolve Life Insurance Disputes Involving Minor Beneficiaries
Our law firm has years of experience handling denied life insurance claims involving children and legal guardianship disputes. Whether the issue involves a missing custodial arrangement, a challenge to the beneficiary designation, or a full-blown interpleader lawsuit, we have the tools and legal knowledge to protect your rights.
We’ve successfully disputed attempts by insurers to sidestep payment simply because a minor was listed as the beneficiary. We’ve also helped families recover benefits when a child’s claim was contested by others. If you're dealing with a denial, delay, or dispute involving a minor beneficiary, we’re here to help.
Contact us today for a free consultation. You won’t pay us a dime unless we win your case.