What Is A Beneficiary?
A beneficiary is a person who receives a benefit, which typically has a monetary value. A beneficiary refers to someone eligible to get assets, property, or other benefits from a trust, will, or life insurance policy in the financial world. It could be a person, two or more people, a charity, your estate, etc.
The term “beneficiary” works in different areas, and it could be in a will, life insurance, or real estate. In real estate, the trust owns the real estate while the “trustee” is the beneficiary. When the owner of the real estate dies, the trustee holds legal title to the real estate. The beneficiary can only attain the legal right to an asset or property when the rightful owner passes away.
However, in life insurance, there are two levels of beneficiaries. Life insurance should have both “primary” and “contingent” beneficiaries. The primary beneficiary receives the benefit after the death of the rightful owner, and the contingent beneficiary gets it if the primary beneficiary passes away or is unreachable. However, if both are not available, the estate receives the death benefit.
When naming beneficiaries, it is essential to be clear about your social relationship with them and include their security numbers. Doing this makes it easier for the insurance company to locate your beneficiaries and reduces the possibility of a conflict concerning the death benefit. Aside from naming beneficiaries, it is essential to specify how you want the benefits handled if one or more beneficiaries are unavailable. Failure to do this will earn the estate the benefits and terminate the chances of other people getting it. It is advisable to keep up with your choice of beneficiaries and make amends where necessary.
George has a life insurance policy and two daughters. He made his daughters, Mary and Tina, his beneficiaries. If George dies, his daughters will split all the benefits associated with the life insurance policy. However, if one of his daughters dies before him, George will review who gets the package. He can make the remaining daughter get the whole package or add someone new to his list.« Back to Glossary Index