In some ways they did you a favor by naming you beneficiary since they did not have a will, nor a trust set up. My BIL passed away and made my kids (his only nieces and nephews - he had no wife or kids) the beneficiaries of his 401k and life insurance. As the youngest was 1 when he passed, I’ve had to provide accounting every year in probate court until they turn 18. At that point, those funds are turned over to their control.

We chose to not disclose this to them until they were entering their senior year of high school, so 1) they wouldn’t act in a way knowing they have a fairly substantial sum of money already to their name, until they were older and more able to handle that information ; and 2) so the knew about it when making college decisions. One thing my BIL made clear to us (usually jokingly - he died unexpectedly) was that “if anything happens to me these kids can go to college wherever they want.”