For families with young children, the primary objective in having life insurance is to make sure that resources are available to provide for those children through young adulthood. Often, we see folks who have listed their spouse as a primary beneficiary and their children as secondary beneficiaries. Having a minor child listed as a beneficiary on life insurance policies (or any other type of account with a beneficiary) can cause significant unforeseen circumstances.
Primarily, financial institutions will not make a payment directly to a minor child. They will require that a conservator be appointed by the court. The conservator may be someone that you’ve nominated in your will, or if you do not have a will, the person to serve as conservator will be determined by the Arizona Statutes and a commissioner of the Superior Court.
Whether the conservator is nominated in a will or not, the appointment of a conservator is not a simple process. The proposed conservator will need to file paperwork with the Court and appear at at least one hearing in front of a commissioner before being appointed. Once a conservator is appointed, the financial institutions will pay the benefit to the conservatorship. On a yearly basis, the Conservator is required to account for the funds in the conservatorship account and request the Court’s approval of how the funds were used. The conservator will likely need an attorney to represent them in these various Court requirements and at hearings.
Establishing and maintaining a conservatorship costs time and of money. It is important to understand this, as well as the alternatives, before naming minor children as beneficiaries on life insurance policies (or any other type of account). Beneficiary designations are something that must be considered as a part of the estate planning process and an experienced estate planning attorney can help you navigate the alternatives and what will work best for your estate plan.