What is a common approach to addressing the problems of naming a minor as a beneficiary to a life insurance policy?

Establishing a trust to administer proceeds is a common and effective approach when naming a minor as a beneficiary on a life insurance policy. This method ensures that the funds are managed responsibly until the minor reaches the age of maturity or is otherwise able to handle the funds independently. A trust can be tailored to outline specific instructions on how and when the life insurance proceeds are to be distributed, providing a level of oversight and protection for the minor's financial interests.

In contrast, giving the proceeds directly to the minor could pose legal and financial challenges, as minors typically cannot enter into contracts or manage significant sums of money without adult supervision. Using a will for distribution may not be as effective in ensuring timely access to funds, since the probate process can delay the transfer and may not be immediate. Choosing another adult to act as a beneficiary is a potential solution, but it does not directly address the need for responsible management of those proceeds on behalf of the minor. Therefore, establishing a trust is the most comprehensive way to ensure that the life insurance benefits are preserved and administered appropriately for a minor.