This question should have been asked when the kid turned 18 and he was deciding, with advice from his mother and investment advisers, how to invest the funds.   And, how were the funds invested before he turned 18?  Just sitting there, paying no interest or dividends (which since 2020 might not have been a big issue)?  Anyway, the source of the funds doesn't make a difference.  

His parents likely were divorced when his father died -- that's why he got the insurance, not his mother.  He presumably collected Social Security benefits -- nontaxable -- until he turned 18.  Maybe she did too.  Now it's time to pay back some of the safety net proceeds that are supported by tax dollars, including kiddie-tax assessments.