If minor children are left the proceeds from a life insurance policy, what happens?

UPDATED: Sep 29, 2022

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If minor children are left the proceeds from a life insurance policy, what happens?

My sister passed away leaving 2 minor children with 2 separate fathers; 1 of whom was an ex-husband. She had a life insurance policy with the 2 daughters named as beneficiaries. It doesn’t appear that she named a guardian. Is there a way to prevent the ex-husband from getting his hands on this money? My deceased sister despised him.

Asked on October 31, 2015 under Insurance Law, Maryland


M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

If a minor child is named as a beneficiary of life insurance proceeds, the insurance company cannot pay money to the minor child. Depending on the state, the company would hold on to the money (at interest) until the child turns 18, or pay it to a court-appointed custodian or local bank (where it may be held at even lower interest). With regard to the appointment of a guardian to administer the proceeds payable to the minor child(ren), once a court appoints a legal guardian of the minor’s estate, that person will control the money for the minor’s benefit until they reach the age of majority, depending on state law. The guardian so appointed is answerable to the court.

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