What is a Beneficiary

A beneficiary is an individual or organization that is designated to benefit from a life insurance policy, a financial account, or trust, among another legal instruments upon the death of the original owner. A beneficiary is the person designated to inherit your possessions if you pass away.

Have you ever wondered what will happen to your assets and hard-earned money after you pass away? Well, this is a topic most people don’t want to discuss for obvious reasons. Considering you have been working or you’re planning to work diligently for the next few decades saving in IRAs, 401k plans or brokerage accounts failing to name a beneficiary on this account will be a big mistake. It’s advisable to take your time and designate beneficiaries- the people or entities that will ensure your possessions are distributed according to your wishes after death. Failure to name beneficiaries, your estate will have to go through a lengthy and costly probate process before it falls into the right hands. As much as this might be a sensitive topic to many, it is a crucial part of planning for the future and protecting your loved ones. 

Key Points about a Beneficiary

• Contingent Beneficiary: While the beneficiary is the first line to receive the assets, your contingent beneficiary will receive your assets if the primary beneficiary predeceases you or is unable to inherit your assets for various reasons. It is also possible to include multiple beneficiaries, usually between family members by designating percentages for each member.
• Example: Tom Smith names his daughter Mary as the primary beneficiary and his son Jonathan as the contingent beneficiary of her $350,000 life insurance policy. In the event Mary sadly passes away, Mary will collect the $350,000 payout. However, if Mary is also deceased, then Jonathan would receive the life insurance proceeds instead.

Being assured that your assets and hard-earned savings will be distributed according to your wishes, even after death, provides peace of mind. This is an essential part of protecting your loved ones and of course, ensuring the estate planning process bypasses the probate stage.