Yes, you can name a minor child as a beneficiary in Texas, but you probably shouldn't do it directly. A direct designation often forces your family into court at the worst possible time.
What is the problem with naming a minor as a beneficiary?
In Texas, anyone under 18 is a minor. A minor can inherit property, but a minor can't legally manage it. A minor can't sign a deed, cash out a life insurance policy, or roll over a retirement account. When a minor is named directly on a will, life insurance policy, retirement account, or payable-on-death account, someone has to be given legal authority over that money. Usually that means a court-appointed guardian of the estate.
A guardianship of the estate can be slow, public, and expensive. The guardian is usually required to post a bond, file annual accountings, and get court approval for many decisions. Those costs come out of the child's inheritance.
The bigger problem: everything at 18
A guardianship of the estate ends when the child turns 18. At that point the child receives the full inheritance outright, with no conditions and no one guiding how it is spent. Few parents would choose to hand a large sum to an 18-year-old with no strings attached.
What about smaller amounts?
Texas law gives some limited shortcuts. For example, money owed to a minor up to a certain amount can be paid into the court registry instead of going through a full guardianship. But the funds are still held by the court, withdrawals still require court approval, and the child still receives the money at 18.
Better alternatives to naming a minor as a beneficiary
- A trust for the child. You name a trustee you trust and decide when and how the child receives distributions. You can set ages, milestones, or purposes such as education and health. This is usually the most flexible option.
- A custodian under the Texas Uniform Transfers to Minors Act (UTMA). A custodian you choose manages the assets without court involvement until the child reaches 21. This works well for modest amounts.
- Naming the right beneficiary on each account. Life insurance, 401(k)s, IRAs, and bank accounts pass by beneficiary designation, not by your will. Naming a child's trust as the beneficiary, rather than the child, keeps those assets out of court.
As Lori Ashmore Peters often says, you can choose your estate plan, or you can take the "no-plan estate plan" and let the state and a judge decide.
Review your designations now
If you or a family member has named minor children as beneficiaries on a will, life insurance policy, retirement account, or bank account, now is the time to take another look. Speak to our team at The Ashmore Law Firm to make sure you have the right estate planning protection in place for your children.
Frequently Asked Questions
What happens if a minor child is named as a beneficiary on a life insurance policy in Texas?
The insurance company generally won't pay the money directly to a child under 18. Instead, a court usually has to appoint a guardian of the estate to receive and manage the funds for the child. Smaller amounts may be paid into the court registry. Either way, the court stays involved, and the child receives the money outright at 18. Naming a trust for the child as the beneficiary avoids this.
Can I name my spouse or another adult to manage the money for my child?
Only if you set it up in advance. Naming the child directly doesn't give your spouse, a grandparent, or anyone else legal authority over the funds, even if they are raising the child. You can choose who manages the money by naming a trustee in a trust or a custodian under the Texas Uniform Transfers to Minors Act. That person can then act without going to court.
At what age does a child receive an inheritance in Texas?
That depends on how you leave it. Assets held under a guardianship of the estate go to the child at 18. Assets held by a custodian under the Texas Uniform Transfers to Minors Act go to the child at 21. With a trust, you decide. You can spread distributions across several ages, tie them to milestones like finishing college, or keep the assets in trust for the child's lifetime.
Does my will control who receives my retirement accounts and life insurance?
Usually not. Life insurance, 401(k)s, IRAs, and payable-on-death bank accounts pass to whoever is named on the beneficiary designation form, regardless of what your will says. If a minor child is named on one of those forms, a well-drafted will won't fix it. This is why reviewing every beneficiary designation is an important part of estate planning.
How often should I review my beneficiary designations?
Review them after any major life event. That includes a birth or adoption, a marriage or divorce, a death in the family, or a change in your finances. Many families also review them every few years with their estate planning attorney. Outdated designations are one of the most common ways a careful estate plan fails.
