Life Policy ProvisionsQuestion 177 of 315
An insured wants to name his 7-year-old grandson as primary beneficiary of a $500,000 policy. Which arrangement is generally the most appropriate way to ensure the proceeds are managed for the minor?
a.Name the proceeds payable to a trust or under the California Uniform Transfers to Minors Act (UTMA) custodian for the grandson
b.Pay the proceeds directly to the 7-year-old in a lump sum
c.Withhold all proceeds until the grandson turns 35
d.Pay the proceeds to the insurer to manage indefinitely
Explanation
Minors generally cannot receive life insurance proceeds directly. The most common solutions are to name a trust as beneficiary, or to direct proceeds to a custodian under the California Uniform Transfers to Minors Act (UTMA), which manages the funds until the minor reaches the age specified by law.
Law Reference: Cal. Prob. Code §3900 (UTMA)Practice all 315 questions free — no signup required.
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