Don’t leave your life insurance to your kid unless you really mean it

Life insurance is a convenient way to take care of the ones you love after you are gone.  Not only can you do so without a formal will or trust, but the insurance provides pecuniary support whether or not your own estate would have been able to.  Many times, the person life insureds are looking to protect are their spouse or their children.  Many name their spouse as the beneficiary and their children as the contingent beneficiaries.  Not so fast!  

The Restatement, Second, of Contracts § 311 (2) and (3) read as follows:

(2) In the absence of such a term, the promisor and promisee retain power to discharge or modify the duty by subsequent agreement.

(3) Such a power terminates when the beneficiary, before he receives notification of the discharge or modification, materially changes his position in justifiable reliance on the promise or brings suit on it or manifests assent to it at the request of the promisor or promisee.

So, you can’t discharge or modify a duty to a beneficiary unless the beneficiary 1) sues on it, 2) relies on it , or 3) manifests assent.  No problem right? 

The problem is that minors are assumed to have manifested assented.  This problem is well illustrated in McDaniel Title Co. v. Lemons, 626 S.W.2d 686 (Mo. Ct. App. 1981).  In McDaniel, the court found that an attempt to change a property settlement agreement was void because it was made for the benefit of a minor, a minor’s assent is assumed, and therefore the Restatement, Second, of Contracts § 311, as adopted by Missouri, prevented the modification of the agreement.

So what do you do?  You don’t leave your life insurance to your kid unless you really mean it.  Also, if you used to be named the beneficiary and have fallen out of favor, you may have a great lawsuit.