Spooky Season Series: The Parent Trap
Some parents think they’ve done the responsible thing: logging into retirement accounts, filling out beneficiary forms, and listing their young child (say 6 year-old) as the beneficiary. They are thinking if something happens to them, the money will go straight to their child.
But… these well‑intentioned (yet uninformed) choices lead to some legal horror stories. In Florida, naming a minor child as a direct beneficiary can trigger a guardianship, court control, and unintended consequences. So, let’s navigate through this parent trap.
Why the Money Doesn’t Go Directly to the Child
Even though some parents think that once they pass their life insurance proceeds or retirement accounts will flow directly to their young children, Florida law says otherwise. In Florida, a “minor child” is someone under the age of 18. Minors are generally not legally capable of taking control of or managing assets.
If a minor child is named as a beneficiary of a life insurance policy, retirement account, bank account, etc., and the amount to be paid out is over a certain amount (usually $15,000) the financial institution usually cannot legally pay the child directly. Instead, a court may need to appoint a guardian or custodian to handle the funds.
What does this mean?
The Money Becomes Entrapped in Court
A petition must be filed for a guardianship of the property under Florida statutes (Chapter 744) if the minor owns or will own property or funds and cannot manage them. This requirement is intended to protect the child but that protection comes with delay and expense.
After the petition for guardianship is filed, a judge will have a hearing where the judge will take testimony from all interested persons. The judge will then decide who to appoint as the minor’s guardian. In some instances a secondary guardian (a guardian ad litem) may be required. Attorneys’ fees, guardian(s) fees, and court costs all can reduce the amount the child actually receives.
The court appointed guardian must account for the funds and may be supervised by the court. The funds may be placed in a restricted account and cannot be freely used usually until the minor turns 18. Once the child reaches 18, the entire amount may be distributed outright.
Obviously giving an 18‑year‑old full control of possibly large sums is spooky in and of itself.
Why so spooky:
Delay: the child may not access needed funds for education or well‑being in a timely manner.
Cost: Lost value from court’s, attorneys’, and guardian’s fees.
Risk of misuse: when the child turns 18, they may receive everything at once, with no strings and perhaps no financial maturity.
What to do instead?
First, talk to an estate planning attorney. Just like every person is different, every estate plan is different. Ask about a trust (or other structured alternative) tailored for minors under Florida law or custodial account in compliance with the Florida Uniform Transfers to Minors Act. In situations where you are exploring a trust, because the trust (not the minor)is the legal owner of the assets until you decide otherwise, the money usually does not go directly to the child, but rather for the child’s benefit. You can specify when and how the child gets distributions: for example, half at 25, the remainder at 30, or for specific purposes only (college, home purchase, etc.).
In a case where custodial accounts are considered, also contemplate the limitations: once the child reaches a certain age (18, 21, or max 25 in Florida if properly structured), the assets must be turned over to the child and the lack of detailed conditions (education, maturity, specific uses) the way a trust does.
Parents want their children to be safe, supported, and set up for the future. That’s why they go through the hassle of naming their kids in the first place. But naming a minor child as beneficiary could have unintended consequences for the uninformed.
Want to avoid a spooky mistake? Reach out for a consultation and let’s build an estate plan that doesn’t come back to haunt your family. At Brett Legal, we carefully create Estate Plans to help our clients avoid uninformed decisions that lead to unintended consequences. If you are in need of an attorney to prepare your estate plan, do not hesitate to contact us.
Thank you for following our Spooky Season Series. Can you guess what we have coming up next?
Sincerely,
Silvia A. Brett, Esq.
Silvia Brett is an attorney who handles Estate Planning and Probate throughout the state of Florida and Florida Supreme Court Certified Circuit Civil Mediator based in St. Petersburg, FL. Click here for more information.
Disclaimer: The information provided on this blog is for general informational purposes only and is not intended to be legal advice. The content may not reflect the most current legal developments, and it is not guaranteed to be complete or up-to-date. The information on this blog should not be taken as legal advice for any specific case or situation. You should not act or refrain from acting based on any content included in this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in your jurisdiction. The author expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this blog. If you have any questions about your legal rights or obligations, you should consult an attorney.
