Ask Terry Questions How to invest and shield life insurance death benefits for a minor?

How to invest and shield life insurance death benefits for a minor?

By Terry Savage on July 14, 2018 | Insurance & Annuities

My son is the beneficiary on his deceased father’s life insurance policy. The insurance company has not issued payout to date, because I didn’t file for custodianship. My husband died 5 years ago. My son just turned18 yrs old and a senior in high school with plans to go to college next year. It’s our plan to use this money for college. Is he entitled to interest on this money? Where should we move this money to shield from taxes, gain interest and use for college?

Your response in this matter will be greatly appreciated. I’ve been stressed out about making sure he had this money for college because we didn’t properly plan/save for him. I look forward to your response.

Terry Says

Well, this is a pretty clear demonstration of why you should not make a minor a beneficiary of a life insurance policy — and instead create a trust with the child as beneficiary, and a trusted adult as the trustee –and include directions for the use of the money! That’s truly water over the dam now!

Do you realize that ALL of this money will go to this 18 year old boy, presuming age 18 is the age of “majority” in his state of residence. Good thing you are making plans to use the money wisely, but it will be up to him to make the decisions. AND, having money directly in his name will preclude getting ANY financial aid until the money is spent.

When he receives the money it should be put in a money market deposit account in a bank. Period. It is going to be used in the next four years for college, so no speculating in stocks or bitcoin! I am keeping my fingers crossed that he doesnt do something outrageous with the cash and buy a car! And I’m presuming that it will be just enough to pay for college — and not a lot more.

The thing that truly troubles me is whether the insurance company must pay interest — even at some minimal rate — for the years they did not distribute the money. Please DEMAND to talk to a regional manager or corporate headquarters of the insurance company. And if you can’t get anywhere please write back to me, sending an email to, with details of who you contacted, and policy number, and how I can reach you. Maybe we can conf call together if you get nowhere.



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