Michigan Minors and Life Insurance Beneficiaries

• Michigan probate law states that minors under the age of 18 may not receive an inheritance, even if the inheritance names a beneficiary in an attempt to circumvent probate court. Because of this law, the funds from the policy must pass through probate court, where a property guardian will be named. As a result, the estate will be subject to attorney fees, and the court will supervise the life insurance benefits, both which usually are major hassles for those involved.
  
  

Avoiding Probate

• The law provides several legitimate ways for a policyholder to avoid probate. The easiest way is to name a reliable adult beneficiary who will administer the assets for minor children. Alternatively, a policyholder can opt to name his minor children as beneficiaries, but appoint an adult custodian, which is permitted under the Michigan Uniform Transfers to Minors Act; however, the policyholder should be sure to confirm with the insurance provider that this option exists, as well as complete the required paperwork.
  
  

Living Trust

• A third way to avoid probate is to set up a living trust, and then name the trustee as "the beneficiary" of the life insurance proceeds. The trust document should name the child as the beneficiary of the trust; it should also establish clear rules with regard to how the trust's assets will be managed. If this option is selected, a copy of the trust will need to be provided to the insurance company.
  
  

Legal Age

• In Michigan, the proceeds from a life insurance policy can be turned over to the child when she has reached legal age, or the age of majority, which is 18. However, if the amount of the inheritance is very large, the custodian or trustee may elect to wait until the beneficiary (child) is older before releasing the funds. In short, carefully considering how assets will be distributed to a minor in advance can save a lot of probate-related headaches.