Was your child a named beneficiary on the life insurance policy of a loved one? If so, you are now probably hearing from the life insurance company that you have to establish a “minor guardianship” or “minor conservatorship” before they can release the proceeds to you. Parents are often frustrated and surprised by this – since they assumed that because they are the parents of the minor, they should just get the money and be able to hold it and use it for their child and then hand it over to the child when he/she becomes an adult. Unfortunately, that isn’t how it works. Minnesota law requires that a minor conservatorship be established (life insurance companies will often, incorrectly, refer to it as a minor guardianship).
What is involved in establishing a minor conservatorship for life insurance proceeds or an inheritance in Minnesota? The proposed conservator (usually parents of the minor) must petition the court to be appointed. The petition sets forth the details of the situation. An attorney is sometimes appointed for the minor child. The court holds a hearing on the petition. A background study may be necessary for the proposed conservator. Depending on the situation, the court may restrict the funds, meaning the conservator cannot spend them absent a court order. Sometimes the courts allow the conservator to spend the funds for the care and well-being of the child while he/she is a minor. In all cases, there are annual reporting requirements by the conservator, so that the court can monitor the account. Each minor conservatorship situation is different and most people find it helpful to have an attorney assist them with the process.
What happens when a child that is under the age of 18 inherits money, either through an estate or directly as a named beneficiary on a life insurance policy or account? Typically, the minor is required to have a conservator appointed to accept and manage the inheritance. Parents of the minor are usually surprised to learn that this is necessary and that they can’t just receive and manage the money on the minor’s behalf, since they are the parents. The process of having a conservator appointed for a minor who is named to receive an inheritance is usually uncontested. However, because of the procedural requirements that must be followed in order to have a conservator appointed, many people find it necessary and useful to have an attorney represent them. If you choose not to have an attorney, the Court will still hold you to all of the Court rules and require that the statutes be followed. Time and again I have seen well meaning parents attempt the paperwork on their own, only to have the process delayed because they didn’t follow all of the Court rules to establish a conservatorship for their minor child. If you have questions about the process to establish a minor conservatorship, please reach out to Cindi Spence at Spence Legal Services (763) 682-2247.
What happens when a minor child receives an inheritance? Can life insurance proceeds just be given to a minor child’s parent for safekeeping, or is court action necessary? What if a minor is a payable on death beneficiary of an account?
I am frequently contacted by parents with questions such as these. My answer is usually “it depends”. Typically, it depends on the amount of money the minor child is expected to receive.
If it $5,000.00 or less, then a parent or guardian of the child can typically just receive the payment directly and manage it on behalf of the child. The details can be found in Minn. Stat. 524.5-104. Note that the person receiving the money must use it for the care, support, education and health of the minor.
If it is more than $5,000.00, typically a “conservator” must be appointed for the minor. This involves going to court. It is usually a routine matter, but it is important that the court rules regarding the petition, notice to interested persons and background checks be followed. Depending on the county that you are filing your papers in, the process can take as long as 8 weeks. Many people find it beneficial to have a lawyer involved in the process. If you do not have a lawyer, you will still be expected to follow all of the rules of court that the lawyers need to follow.