The Office of General Counsel issued the following informal opinion on February 6, 2001, representing the position of the New York State Insurance Department.

Re: Minors as Owners, Beneficiaries and Donees of Life Insurance Policies

Questions Presented:

1) Does the New York Insurance Law prohibit grandparents, as insureds and owners of a life insurance policy, from making a gift of such policy directly to a minor grandchild?

2) Does the New York Insurance Law prohibit a minor from owning, or being the beneficiary of, a life insurance policy?

3) Does the New York Insurance Law have age restrictions on the ownership of life insurance policies?

Conclusions:

1) It depends on the age of the minor. N. Y. Ins. Law § 3207(a) (McKinney 2000) deems a minor above the age of fourteen years and six months competent to be the owner or donee of a life insurance policy. As such, grandparents can make a gift of a life insurance policy directly to such minor. However, under Section 3207, minors below that age are prohibited from owning, or being the donee of, life insurance policies. Nevertheless, a minor below the age of fourteen years and six months may be a donee of a life insurance policy pursuant to New York’s Uniform Gifts to Minors Act (UGMA), Estates, Powers and Trusts Law (EPTL) §§ 7-4.1 to 7-4.12 (McKinney 1992) and Uniform Transfers to Minors Act (UTMA), EPTL §§ 7-6.1 to 7-6.26 (McKinney Supp. 2001). Under the UGMA/UTMA, an adult may make a gift of a life insurance policy indirectly to a minor, regardless of age, by designating a custodian to receive, hold, and manage the gift on behalf of the minor until the minor reaches the age of majority.

2) It depends on the age of the minor. Pursuant to N. Y. Ins. Law § 3207(a) (McKinney 2000), a minor above the age of fourteen years and six months is deemed competent to contract for, own, and exercise all rights relating to a life insurance policy. Conversely, the Insurance Law deems a minor below that age to lack the capacity to contract for, own, or be the designated beneficiary of a life insurance policy.

3) Yes. N.Y. Ins. Law § 3207(a) (McKinney 2000) prohibits minors below the age of fourteen years and six months from owning life insurance policies.

Facts:

The Department was asked to clarify whether a minor can own, or be the beneficiary of, a life insurance policy, and whether grandparents can make a gift of their life insurance policy to a minor.

Analysis:

A gift is defined as the "voluntary transfer of property to another made gratuitously and without consideration". See Black’s Law Dictionary 619 (5^th ed. 1979). A life insurance policy is considered personal property; therefore, the owner is free to make such property a gift to someone else. Once the owner of personal property (donor) expresses intent to make a gift and delivers it to the donee directly or to a custodian/guardian for the donee, the donee of the gift becomes the absolute owner of such gift. N.Y. Ins. Law § 3207(a) (McKinney 2000) deems a minor above the age of fourteen years and six months competent to "enter into a contract for, be the owner of, and exercise all rights relating to", a policy of life insurance on the life of the minor or any other person in whom the minor has an insurable interest.

N.Y. Ins. Law §3207(a) (McKinney 2000) states:

Under N.Y. Ins. Law § 3205 (a)(1)(A) (McKinney 2000) insurable interest arises out of love and affection between persons closely related by blood:

Therefore, a minor above the age of fourteen years and six months has an insurable interest in the life of his or her grandparents and is, therefore, allowed, pursuant to Section 3205, to own a life insurance policy issued upon their lives.

Conversely, under the Insurance Law, a minor below that age is deemed incompetent to own a life insurance policy. However, pursuant to the New York Uniform Gifts to Minors Act (UGMA), Estates, Powers and Trusts Law (EPTL) §§ 7-4.1 to 7-4.12 (McKinney 1992 & Supp. 2001) (governs gifts made prior to 1997) or Uniform Transfers to Minors Act (UTMA), Estates, Powers and Trusts Law (EPTL) §§ 7-6.1 to 7-6.26 (McKinney Supp. 2001) (governs gifts made after January 1, 1997), transfers or gifts can be made indirectly to a minor of any age so long as there is donative intent on the part of the donor, and said donor designates and transfers the gift to a custodian to hold, manage, and deliver to the minor when the age of majority is reached. Note, however, that pursuant to EPTL § 7-6.14(b) (McKinney Supp. 2001), when a minor reaches the age of fourteen s/he may ask a court to "order the custodian to deliver or pay to the minor or expend for the minor’s benefit so much of the custodial property as the court considers advisable for the use and benefit of the minor". A review of these statutes, and consultation with an attorney, is advisable.

As respects the inquiry as to whether the New York Insurance Law prohibits a minor from owning, or being the beneficiary of, a life insurance policy, it is clear that N.Y. Ins. Law § 3207(a) (McKinney 2000) deems a minor above the age of fourteen years and six months competent to contract for, own, and exercise all rights relating to a life insurance policy. Section 3207(a) also states that the beneficiary of such policy can only be the minor, or the parent, spouse, brother, sister, child or grandparent of the minor. Based on Section 3207(a), a minor above the age of fourteen years and six months can be the owner and beneficiary of a life insurance policy

The New York Insurance Law prohibits a minor under the age of fourteen years and six months from freely contracting for, owning or exercising rights relating to a life insurance contract, such as being a beneficiary. Legally, however, an insured may name anyone s/he chooses to be a beneficiary; thus, s/he may designate a minor below the age of fourteen years and six months. Designating a minor below the age of fourteen years and six months as beneficiary of a life insurance policy can pose special problems for the insurer, as well as the insured. For that reason, if an insured intends to designate a minor below the age of fourteen years and six months, an attorney should be consulted.

Finally, the Department was asked whether, under the New York Insurance Law, there are any age restrictions on owning a life insurance policy. As discussed above, N.Y. Ins. Law § 3207(a) (McKinney 2000) deems a minor above the age of fourteen years and six months legally competent to "contract for, be the owner of, and exercise all rights relating to, a life insurance policy upon the life of the minor or upon the life of any person …." Accordingly, the Insurance Law prohibits a minor below that age from owning a life insurance policy. However, the UGMA/UTMA permits a minor of any age to own, although indirectly, a life insurance policy by way of a gift or transfer from an adult.

For further information you may contact Attorney D. Monica Marsh.