Leaving Life Insurance to Children: Guardians, UTMA and Trusts

For many parents, children are the whole reason to buy life insurance. So it surprises people to learn that writing a young child's name on the beneficiary form can create problems at exactly the wrong moment.

The National Association of Insurance Commissioners (NAIC) puts it plainly: insurance companies generally do not give benefits to minors. Someone with legal authority has to receive and manage the money until the child is grown, and if you have not chosen that person and the arrangement, a court may have to.

This guide explains the main options at a general level. It is not legal, tax or insurance advice. The rules come from state law and from your policy, and they differ from place to place. A licensed estate planning attorney in your state can tell you what fits your family, and your state insurance department can explain how insurers there handle claims for minors.

Why naming a minor directly causes problems

When a beneficiary is a child, the insurer needs an adult who is legally authorized to accept the payment on the child's behalf.

The federal Servicemembers' Group Life Insurance (SGLI) beneficiary form, SGLV 8286 (February 2025 edition), shows how one program handles it: if the beneficiary is a minor at the time of the claim, the benefit is paid to the court-appointed guardian of the minor's estate. The form offers one alternative, which is to set up a trust for the child and name the trustee as beneficiary.

A guardianship of the estate is a court case. The California courts' self-help site describes it as the court ordering someone to manage the child's finances, and notes that it is needed if a child has a lot of money, income or property, such as an inheritance from a parent who died. These guardianships come with strict rules about how the money is handled, the court stays involved, and the site says it is usually best to have help from a lawyer.

Courts also treat raising a child and managing a child's money as separate jobs. California's site describes a guardianship of the person, which covers decisions such as medical care and school, and a separate guardianship of the estate for finances. Naming someone to raise your children does not by itself settle who controls their insurance money.

Option 1: a custodian under the Uniform Transfers to Minors Act

A Uniform Transfers to Minors Act (UTMA) custodianship lets an adult custodian hold and manage property for a child under a state statute, without a full court guardianship. The details depend on your state's law, so it helps to look at a real example and then check what your own state allows.

Washington's version, chapter 11.114 of the Revised Code of Washington as posted in 2026, allows a person to nominate a custodian in a beneficiary designation filed with the company that will pay, by naming the custodian "as custodian for" the child "under the Washington uniform transfers to minors act." The nomination can also name backup custodians.

Under that statute, a custodian may spend custodial property for the child's use and benefit as the custodian considers advisable, without a court order. The custodianship does not last forever, though. Under Washington's law, property an insurer transfers to a custodian named this way generally goes to the young person outright at age 18, although the person who nominated the custodian can choose to extend the custodianship to as late as age 25. Other states set different ages.

A UTMA custodianship is generally simpler than a trust, but it is also less flexible. The law, not you, sets most of the rules, and at the end of the custodianship the young adult receives whatever is left with no strings attached. Ask your insurer whether its beneficiary form accepts a UTMA custodian designation and how to word it for your state.

Option 2: a trust

A trust lets you write your own instructions. You choose the trustee who manages the money, and the trust document, rather than a default statute, can set out how the money is used and when the children receive it. You then name the trust, or its trustee, as the beneficiary of your policy.

Two cautions from the SGLI form apply broadly. First, naming a trust as a beneficiary on a form does not create a trust; the trust must already exist, set up in proper legal documents. Second, the form recommends getting help from an attorney, financial planner or estate planner to create the trust documents. Trusts can cost more to set up and may involve ongoing administration, so weigh that against the size of the policy and the complexity of your family.

Option 3: naming a trusted adult

Some parents simply name a grandparent, sibling or close friend and ask that person to use the money for the children. This avoids paperwork, but it relies entirely on trust. The insurer pays the person you name, and a promise to use the money for your children is a family understanding, not something the policy enforces. If that adult dies, divorces or runs into money trouble, the children's interests have no formal protection.

What about naming your estate?

The NAIC suggests considering leaving money for a minor to an estate or trust that can manage the benefits until the child is of age. If the estate is the beneficiary, your will can say what happens to the money. Keep in mind the Texas Department of Insurance's caution that when a death benefit is paid to an estate, heirs might have to pay taxes on money they receive from the estate, and the money may have to go through estate settlement first. Talk with an attorney about whether this route makes sense for you.

A practical checklist

• Decide who would manage the money and who would raise the children; they can be the same person or different people.
• Choose an option (UTMA custodian, trust or another arrangement) and confirm with your insurer that its form accepts it.
• Name contingent beneficiaries, so there is a plan if your first choice dies before you.
• Make sure your will, any trust and every policy, including group coverage at work, point the same way.
• Review your designations after each birth or adoption. The NAIC recommends updating policies after major life events, and the SGLI form notes that beneficiaries are not changed automatically when you have children.
• Tell the people you have chosen where your policies are kept. For more on wording the form itself, see our guide "Naming Beneficiaries: Primary, Contingent and Per Stirpes."

Key takeaways

• Insurers generally do not pay death benefits directly to minors, so a child named outright may need a court-appointed guardian of the estate.
• A UTMA custodian, where your state and insurer allow it, is simpler than a trust, but the child gets the money outright at an age set by state law.
• A trust offers the most control, but it must be properly created before you name it, usually with an attorney's help.
• Naming a trusted adult relies on that person's goodwill, not on any legal duty in the policy.
• Coordinate your will, trust and every beneficiary form, and revisit them after each new child.

Sources

• National Association of Insurance Commissioners, What Should I Know About Life Insurance Beneficiaries? (October 12, 2026)
• U.S. Department of Veterans Affairs, SGLI Beneficiary Designation, Form SGLV 8286 (Ed. 02/2025)
• Judicial Branch of California, Guardianship (self-help guide)
• Washington State Legislature, RCW Chapter 11.114, Uniform Transfers to Minors Act
• Texas Department of Insurance, Life insurance guide (updated December 12, 2025)