The beneficiary is a minor: how do they receive the money, and what does the guardianship authority have a say in?

For parents of young children, it is a natural idea to make the child the death beneficiary of their pension insurance: “if anything happens to me, the money I have put aside should be theirs”. The designation takes a few minutes, but few people think its consequences through. A minor cannot freely receive and manage several million forints: their legal representative acts on their behalf, and above a certain threshold the guardianship authority also has a say in what happens to the money. As a broker, I see that most parents name the child in the belief that the other parent will “manage” the amount for the benefit of the family – and that is only partly true. This article goes through the topic from the angle of pension insurance: what a minor beneficiary is entitled to, how they get the money, what the guardianship authority says, what happens to the tax credits – and how to designate if the aim is both the child's security and the family's room for manoeuvre.

What is the beneficiary entitled to, and why is it not part of the estate?

Pension insurance treats the insured person's death as an insured event: in that case the insurer pays the death benefit set out in the policy conditions – in most Hungarian products the current value of the savings, and with some products a fixed risk sum on top of that; this differs by insurer and by product. The benefit is due to the beneficiary named in the contract and is not part of the estate: the insurer pays not to the notary but to the beneficiary, without waiting for the probate proceedings. This is the biggest advantage of the designation and, with a minor, also its biggest question, because the money goes not “to the family” but to a specific child, whose assets are protected by special rules. The designation procedure and the typical mistakes are described in the article on inheritance and beneficiary designation, and how death cover works in the article on death cover.

How does a minor get the money?

Under the Ptk., a child under 14 has no legal capacity, their legal declarations are void, and their legal representative acts on their behalf (Sections 2:13–2:14); a child between 14 and 18 has limited legal capacity, and their declarations are valid with the legal representative's consent (Sections 2:11–2:12). The legal representative is the parent exercising parental custody – after the insured person's death, typically the other parent – or, if both parents have died or cannot exercise custody, a guardian appointed by the guardianship authority. So the death claim is submitted to the insurer by the legal representative on the child's behalf, and the insurer pays to the minor beneficiary. Hungarian practice may vary here: the insurer may transfer the money to a bank account opened in the child's name, may ask for the legal representative's declaration and proof of parental custody, and, for larger amounts, may refer to the guardianship authority's approval or to an account designated by the guardianship authority. This is worth clarifying with the insurer's customer service before the payout; a general list of the steps is given in the article on the beneficiary's tasks. One thing does not change: the money belongs to the child; the parent only manages it.

What does the guardianship authority have a say in?

Under the family law book of the Ptk., the parent must manage the child's assets according to the rules of ordinary asset management, in the child's interest – not spend them freely. The guardianship authority comes in at two points. The first is the threshold: under Section 2:15(1)(e) of the Ptk., the legal representative's legal declaration is valid only with the guardianship authority's approval if it disposes of an asset of the minor whose value exceeds the amount set by law. According to a 2023 information article by the Financial Arbitration Board (PBT) of the MNB (Hungary's central bank and financial supervisor), this limit is forty-five times the social reference amount (szociális vetítési alap), which, with a reference amount of HUF 28,500, comes to HUF 1,282,500 – it is worth checking the current reference amount in the rules in force. The death benefit of a pension insurance that has been running for several years typically exceeds this limit, which means the other parent can dispose of the money only with the guardianship authority's approval: without permission, it cannot be put into buying a home, used to repay the family's loans or kept in the parent's own account. The second point concerns assets handed over to the guardianship authority: in the child's interest, the guardianship authority may order the money to be placed in a guardianship-restricted deposit (gyámhatósági fenntartásos betét), from which payments can be made only on the basis of a decision by the guardianship authority – under Section 2:15(1)(d), disposing of assets handed over in this way also requires approval. Section 2:16, in turn, declares void any declaration by the legal representative by which they make a gift at the expense of the child's assets, assume someone else's obligation without consideration, or waive a right – not even the guardianship authority can approve these. For the child's own needs – schooling, medical treatment, the child's housing – the guardianship authority typically authorises use of the money, but on application, with reasons and by formal decision; the child can freely dispose of the amount in the deposit on reaching the age of majority.

Adult beneficiary under guardianship

The situation is similar if the beneficiary is an adult but under guardianship (gondnokság). For a person under guardianship that fully restricts legal capacity, the guardian acts on their behalf; with guardianship that partially restricts capacity, the court's decision specifies in which matters the guardian's consent is needed – financial matters typically fall into this category. The guardian manages the assets under the supervision of the guardianship authority, and above the threshold set in the decision appointing the guardian, disposing of them likewise requires the guardianship authority's approval. If you intend the death benefit of your pension insurance to provide for a child with a disability in the future, it is worth thinking through in advance, with a lawyer, whether direct designation or another solution that is more flexible in how the money can be used would serve the purpose better – this is no longer an insurance question but a family law one.

What happens to the tax credits and the tax?

A special feature of pension insurance is that death is a “regular” close of the contract under the tax rules as well. Section 3, point 93 of the Personal Income Tax Act (Szja tv.) lists the insured person's death among the insured events of pension insurance and also exempts it from the 10-year rule: the benefit is due under the rules for pension insurance even if the contract started two years ago. The tax credits received earlier do not have to be repaid with the 20% increase – the insurers' tax information sheets list the repayment events (surrender, termination for non-payment of the premium, refund of excess premium), and death is not one of them. If, after the insured person's death, the final year's tax credit arrives from NAV (the Hungarian tax authority) on a contract that has already ended, according to the information sheets the insurer pays it out to the beneficiary without any instruction rather than transferring it back to the tax authority. What happens to the deceased policyholder's instruction for their last tax year depends on the tax authority's procedure for deceased taxpayers – it is worth clarifying this with the accountant and not worth counting on it. According to the insurers' tax information sheets, the death benefit is tax-free under the point on insurance benefits in Annex 1 to the Szja tv., so the amount paid out is subject neither to the 15% tax on interest income (kamatadó) nor to social contribution tax (szocho). The full picture of how the payout is taxed is given in the article on the taxation of the payout.

How should you designate if you have a young child?

• Decide what the aim is: if it is for the money to go to the child in any event, with nobody else able to touch it, direct designation gives you exactly that – together with the guardianship authority's oversight.
• If the aim is to provide for the family, including the child, many parents name the other parent as the primary beneficiary and the child as the secondary one, in case the spouse is no longer alive – the order and the shares of the designation are the policyholder's decision, with the insured person's consent.
• With several children, specify the shares; if no shares are given, the policy conditions typically apply equal shares – this differs from insurer to insurer.
• Write down for your relatives where the policy document is and who the beneficiary is; the guardianship authority's procedure may require the death certificate, the child's birth certificate and proof of parental custody.
• After a divorce, a new marriage or a new child, review the designation – the policyholder can change it by a declaration; the roles are described in the article on the parties to the contract.

If you let me know, I will help where I can; on guardianship and probate questions, a lawyer or the guardianship authority can give you an authoritative answer.

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Sources

• Hungarian Civil Code (Ptk., Act V of 2013) Sections 2:11–2:16 – a minor's legal capacity, the legal representative's legal declarations, the guardianship authority's approval
• Personal Income Tax Act (Szja tv., Act CXVII of 1995) Section 3 point 93 – definition of pension insurance, the insured person's death as an insured event; Section 44/C
• MNB – Dr Krisztina Szente (Financial Arbitration Board, PBT): How can children and persons under guardianship use banking services? (28 November 2023) – guardianship authority approval, threshold, persons under guardianship
• GRAWE: Pension insurance tax information (Nyugdíjbiztosítás Adózási Tájékoztató, 1 January 2025) – repayment events, payment of a tax credit arriving on a terminated contract to the beneficiary

Related articles

• Inheritance and beneficiary designation in practice
• What happens if the insured dies? How the death benefit protection works
• Death benefit: the beneficiary's steps, one by one
• Taxation of the payout: what the rule says, and what your accountant says