Choosing a Beneficiary or Custodian
One final detail that all parents need to consider when arranging their life insurance policy is choosing an appropriate beneficiary or custodian. When minors are involved the “primary beneficiary” is the person who will be taking care of them financially, and in most cases, caring for them physically as well.
For example, in a family situation the wife would be the beneficiary of her husband’s policy, and vice versa. This means that should one parent die, the other parent will have the ability to manage the money left from the life insurance policy.
But what if both spouses die, they are divorced, or only one parent raises the children?
This is why you should always have a custodian chosen in the event that no parent is able to care for your child or children. If you do not select someone to manage their money, the courts will do so, and they might not choose the person you would want in charge of a large financial sum.
Learn about the The Uniform Transfers to Minors Act, or UTMA