What Is a Beneficiary in Estate Planning?
Learn what a beneficiary is, how they’re named, and why it’s critical to keep beneficiary designations up to date. Get estate planning guidance from an experienced attorney.
What Is a Beneficiary?
If you’re setting up an estate plan — or listed in someone else’s — you’ve probably come across the term beneficiary. But what does it really mean?
Put simply, a beneficiary is the person (or entity) who will receive money, property, or other assets from a will, trust, or financial account after someone passes away.
Common Types of Beneficiaries
Beneficiaries can be:
- Individuals – such as spouses, children, grandchildren, siblings, or friends.
- Organizations – including charities, religious institutions, or nonprofits.
- Trusts – you can name a trust itself as a beneficiary, especially for minor children or individuals with special needs.
You can name one or multiple beneficiaries, and even specify the percentage or type of asset each one should receive.
Where Are Beneficiaries Named?
Beneficiaries are typically named in:
- Wills – specifying who should receive assets after probate.
- Trusts – which allow assets to pass outside of probate.
- Life insurance policies
- Retirement accounts (401(k), IRA)
- Bank accounts or brokerage accounts with payable-on-death (POD) or transfer-on-death (TOD) designations
Important: Assets with named beneficiaries (like life insurance or IRAs) generally pass outside of your will and do not go through probate.
Primary vs. Contingent Beneficiaries
You can name:
- Primary beneficiaries – the first in line to receive the asset.
- Contingent (or secondary) beneficiaries – who inherit only if the primary beneficiary has died or is otherwise ineligible.
Example: You name your spouse as the primary beneficiary of your life insurance and your children as contingent beneficiaries.
Why Beneficiary Designations Matter
Keeping beneficiary designations current is just as important as having a will or trust. Here’s why:
- They override your will. If your will says one thing but your retirement account lists a different person, the account designation wins.
- They can cause conflict. Outdated or missing beneficiary info can delay distribution or lead to legal disputes.
- They ensure faster transfer of assets. Assets with named beneficiaries go directly to the person named.
Tips for Managing Beneficiaries
- Review your beneficiary designations every few years or after major life changes (marriage, divorce, birth, death).
- Use full legal names and relationships when listing beneficiaries.
- Consider setting up a trust as beneficiary if your heirs are minors or need oversight.
Conclusion
A beneficiary is more than just a name on a form — it’s a key part of your estate plan that affects how and to whom your assets will be distributed. Keeping your beneficiary designations up to date ensures your wishes are honored and your loved ones are protected.