New parents often ask, “Can a minor be a beneficiary on a bank account?” Well, the answer is yes, but it depends. And, if you’re a foreigner trying to create new accounts, like a US bank account abroad, different rules can apply.
In this article, we’re going to look at the different considerations and implications of making a minor a beneficiary on various accounts held at financial institutions.
This will apply to anyone opening an account in the US. However, many of these considerations apply when opening non-US bank accounts as well.
Feel free to use the table of contents to skip ahead to the topics most relevant to you:
Table of Contents
- Can a Minor Be a Beneficiary on a Bank Account?
- Alternatives to Having a Minor as a Beneficiary on a Bank Account
- Ready to Open Accounts With Banks in the USA?
Can a Minor Be a Beneficiary on a Bank Account?
Yes, it is possible for a minor to be named as a beneficiary on a bank account.
Minors can be named as beneficiaries on most account types, including checking accounts, savings accounts, investment accounts, and other financial assets such as trusts, insurance policies, and bank accounts. However, there are usually restrictions on the value of assets that will be distributed to minors by banks, insurance companies, etc.
With this in mind, there are several caveats to consider, which often vary based on the jurisdiction (country or state) where the accounts are held.
For this reason, most people choose to name a “guardian” on behalf of the minor at the specific institution where they have accounts. Doing so offers a range of advantages, not the least of which is ensuring that court involvement can be avoided after the original account holder passes.
*Note: this can vary according to the specific inheritance, estate, and probate laws in your jurisdiction, so make sure to consult to qualified professional before making any decisions.
On the other hand, if you do not appoint a guardian and the amount exceeds certain thresholds (usually between $5,000 and $20,000), the court may choose to appoint a guardian for the minor.
Alternatively, the court can also decide to place the money in a blocked account or even invest it on behalf of the minor. The balance (and any appreciation or loss) would then be distributed to the minor on their 18th birthday.
With this in mind, many account holders choose to appoint a guardian because they do not want the distribution of assets to be determined by a court.
Before diving in any further, if this is your first time visiting GlobalBanks, don’t forget to download your FREE US Banking Starter Guide. It’s designed to help non-residents with opening bank accounts at top financial institutions in the US.
Alternatives to Having a Minor as a Beneficiary on a Bank Account
Account holders have several options when considering how to make a minor a beneficiary on financial accounts.
The first option, which we’ve already discussed above, is establishing guardianship. Guardianship essentially means appointing a person of legal age to represent the minor’s interests and distribute funds when necessary.
Another option is to create a trust and appoint a trustee in order to distribute financial assets in accordance with your specific wishes. In order for a trust to make sense, most people consider the number and complexity of financial accounts and assets, the fees of setting up and managing the trust, and the total value of the financial assets that will be distributed.
Alternatively, if you decide to do nothing, it’s possible that your assets will be left to probate and the courts will decide how the assets should be distributed to your beneficiaries. In most jurisdictions, leaving assets to probate is typically the most disadvantageous and least tax-efficient option.
Note: Each option has different implications and the advantages often vary by wealth bracket as well as the jurisdiction of the assets, account holder, and minor beneficiary.
How to Appoint a Beneficiary on a Bank Account
Many international banks have a straightforward process for naming a beneficiary on an account. So, if you already have an account, you can contact your account manager and request the specific documents required to name a beneficiary.
Once the documents are completed, you simply need to submit them to the bank in accordance with the bank’s requirements for authentication or verification (e.g. certified true copy, apostille, notarization, etc). In most cases, it’s best to confirm directly with the bank what form of authentication they will require beforehand since some countries, states, and financial institutions have different requirements.
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