How To Guides

A beneficiary is an individual or entity that receives a portion or all of the estate of a deceased person. Name a beneficiary is an important part of estate planning. Without one, your loved ones may have to go through probate to find out where your assets are.

One person, multiple people, charity, or your estate can all be beneficiaries. If you have a life insurance policy, you will be asked to name a beneficiary so they can receive the death benefit. However, you should also name one to three beneficiaries in your will to ensure that your assets, retirement accounts, and property are distributed to the right people.

You might, for example, name your brother the beneficiary on your life insurance policy. Or you could designate your sister the beneficiary on your 401(k). And make a friend the beneficiary in your brokerage account.

You can designate the benefactor, the person who holds the assets. This includes requiring that a beneficiary reach the age of majority before they receive property.

How can you choose a beneficiary?

These are some tips to help you choose a beneficiary.

1. You have the option of choosing one beneficiary, or you can split your assets between multiple beneficiaries. Many policies require that you choose a primary beneficiary and a secondary beneficiary. A spouse or a partner are typically the primary beneficiaries.

2. You may need to designate your spouse as the primary beneficiary. Some states may limit who you can name for life insurance.

3. A trust can be designated as a beneficiary. A trust, which is an independent legal entity, gives you more control over your assets and can help with tricky estate situations such as naming a dependent or minor as the beneficiary.

4. To receive all or part your assets, you can name a charity/non-profit organization as a beneficiary

How do you name a beneficiary

All of your valuable assets should be given to beneficiaries. These assets include life insurance policies and retirement accounts.

You can name a beneficiary with most accounts, but you can also fill out an online form or go to the bank to change or designate beneficiaries. For the required forms, contact your financial institution or insurance provider.

To avoid legal conflicts or future confusion, it’s a good idea for you to include as much information as you can. If you have complicated family circumstances, such as an ex spouse or adopted child, include your beneficiaries’ Social Security numbers.

Name your beneficiaries in your will to receive property and other assets.

4 types beneficiaries

The primary beneficiary is the person you choose to receive your death benefit or assets from your will.

If your primary beneficiary dies or is unable to be located, a contingent beneficiary (sometimes called an alternate beneficiary or secondary beneficiary) will receive your assets and account benefits. Multiple contingent beneficiaries can be named and specified as to what each one will receive.

If the policy owner (the beneficiary) is still living, a revocable beneficiary may be changed without beneficiary’s consent.

Without written permission, an irrevocable beneficiary cannot be changed. Multiple beneficiaries may require consent from all parties. In some cases, irrevocable beneficiaries can be named in a divorce settlement.

Does a will have to override beneficiary designations

A beneficiary designation can override a will in most cases. If you make a will change but don’t update the beneficiary designations on your life insurance policy or other beneficiary policies to match, assets will still be given to the original beneficiary.

Are children eligible to be beneficiaries?

Although a child under 18 may be named as a beneficiary, there are some legal restrictions. The assets can be transferred to the legal guardian of the minor child until they reach the age of majority. This can sometimes make the payout process more difficult or delay the child’s access.

A trust can be useful to serve as the beneficiary for the child. You can set the terms of your trust to determine how assets will be divided over time.

You can establish a special needs trust if you have a dependent for life, such as a child with special abilities. This will ensure financial security and not disqualify them from receiving government assistance. Your child might be eligible for the benefits they require with this legal structure.

Can I change my beneficiary?

You can generally change your beneficiaries at anytime. After a major life event such as a divorce, death or addition of children or grandchildren, it is a good idea to revisit your will.

Depending on your account, here’s how you can make changes:

• You can change the beneficiaries of a life insurance policy by contacting your provider. To confirm your change, you may need to complete a form. You may have indicated in your policy whether the beneficiary you designated is irrevocable or revocable. If your beneficiary is irrevocable, you will need their consent.

• Contact the financial institution if you have a financial account such as a retirement account or an investment account. You will likely be able to review your policy options during the annual enrollment period if you are eligible for benefits from your employer.

• You can add a codicil to your will. This is a legal document that modifies your will and allows you to make beneficiary changes. While laws vary from one state to the next, you will generally need two witnesses to sign a codicil. It’s best to make a new will and then destroy the one you have.

What happens to my beneficiary if I choose not to?

The benefit payments from your insurance may be delayed if you fail to name a beneficiary. This could happen until the state court or company decides where the money should go. Life insurance policies often have a default payment option that could end up paying to your estate.