Life Policy ProvisionsQuestion 177 of 716
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 grandson in a lump sum, since a named beneficiary always holds a vested right to immediate payment
c.Pay the proceeds to the insurer to hold and manage indefinitely until the grandson reaches the age of majority
d.Withhold all proceeds from everyone until the grandson turns 35, with no one able to reach the funds in the meantime
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)This topic, taught in full in the California Life & Health Insurance Producer Exam guide. California Life & Health Insurance Producer Exam — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)