A minor beneficiary can be named in a Will or a Trust or, by default, be entitled to an inheritance through intestate succession. However, in California, a minor cannot legally own property until they are 18 years of age and must wait until the age of majority to take possession of it.
A parent or guardian can set up a custodial account for the benefit of a minor or establish a joint account with the minor. The most common types of minor bank accounts are checking accounts or savings accounts.
Most life insurance policies will not allow you to directly leave money to beneficiaries who are minors. If you name a minor as a beneficiary, they will have to settle the matter in probate court. In which an adult will be delegated to manage the money until the minor is old enough to be responsible for it themselves.
If you want to name a minor child as a beneficiary to a CD account or other financial accounts, you may also need to name a custodian to manage assets on their behalf until adulthood.
Finally, you should not name a minor as a beneficiary for any bank account. If you want money to go to someone who's not a legal adult, you can name a guardian as the beneficiary. He or she would oversee the money and manage it for the minor in question.
A certificate of deposit (CD) cannot be a gift to another adult, because federal law says that they have to present an ID to open an account in their name. However, you can give a CD to a child or young person by setting up an UTMA or UGMA custodial account and adding a CD to it.
Children under age 18 can be named as a primary or contingent beneficiary. However, if you were to die while they are still minors, the proceeds may be sent in their name to the legal guardian of the minor child's estate. Another common solution to make accommodations for children is through the creation of a trust.
Bank account beneficiary rules usually allow payable-on-death beneficiaries to withdraw the entirety of a decedent's bank account immediately following their death, so long as they present the bank with the proper documentation to prove the account owner died and to confirm their own identity.
2053(c) Trusts
A 2053(c) trust is a specific type of minor's trust that aims to avoid gift taxes. The federal government charges a gift tax, but provides an exemption for gifts valued at $18,000 or less (as of 2024), per year, per recipient.
Banks have a special and easy way to name a child as a beneficiary for a bank account by adding a POD (payable-on-death) addendum to your account. Naming your child a beneficiary for your bank accounts is as simple as filling out a POD form, and you can have different beneficiaries for each of your accounts.
You could add them as an agent under a power of attorney or add them as a designated beneficiary to that account and that is something different, but making a child a joint owner on a bank account is almost never a good idea.
Minors 13 years or older can open a savings account individually or with an adult co-owner. Minors under 13 must have an adult co-owner.
Explanation: A beneficiary who is a minor typically gains legal control of their inheritance when they reach the age of majority, which is 18 years old in most states. Until then, a trustee or guardian is appointed to manage the minor's inheritance on their behalf.
A primary beneficiary is the person (or people or organizations) you name to receive your stuff when you die. A contingent beneficiary is second in line to receive your assets in case the primary beneficiary passes away. And a residuary beneficiary gets any property that isn't specifically left to another beneficiary.
A minor cannot inherit an IRA in their own name, outright. An adult, a parent or guardian or the trustee of a trust established for that minor's benefit, must be designated as the recipient since the minor lacks the legal capacity to own the account or make the necessary withdrawals.
Resident beneficiaries are taxed on income distributed or distributable from all sources. Nonresident beneficiaries are taxed only on income distributed or distributable that is derived from sources within California (R&TC Section 17953).
In the event of your death, your named beneficiaries are entitled to collect a distribution from your bank account. Knowing who your beneficiaries are can keep your loved ones at ease because they can adequately make arrangements on your behalf and take care of any bills and business you may be leaving behind.
The bank account will be frozen until the probate process is complete. If the bank isn't informed of the owner's passing and the account goes dormant, the account may be subject to escheatment, which turns the funds over to the state government.
If you're a parent, you should know that it's possible to name a minor as your primary beneficiary, depending on your insurance company. But there may be some legal implications. Typically, an insurer won't simply give your minor child the death benefit when you pass away.
Often, minor children are designated as beneficiaries of the proceeds of life insurance policies, or of investment accounts such as RRSPs and RRIFs. Minor children, however, are considered parties under a disability and as such are not entitled to receive funds directly.
The most common trust for a minor is known as a custodial account (an UGMA or UTMA account). The Uniform Gift to Minors Act (UGMA) established a simple way for a minor to own securities without requiring the services of an attorney to prepare trust documents or the court appointment of a trustee.
Tax Implications of CDs for Kids
The IRS taxes kids' unearned income, such as interest, dividends, and capital gains, in tiers. In 2024, for a child with no earned income, up to $1,300 in unearned income is not taxed.
Since CDs typically earn higher annual percentage yields (APYs) than standard saving accounts, opening a CD can help your child's savings grow faster. You might also purchase a CD to give to your child or provide a head start on paying for a first car, wedding or other big goal.
Unfortunately, the media is not prevented from publishing the names of minors for any purpose. Many media outlets make it a policy NOT to publish the names (or other identifying information) for minors, but there is no law that would require them to do so.