A beneficiary is a person you designate to receive property from your estate after your death. You can name specific beneficiaries to inherit specific things (like a car, real estate or jewelry) or you can leave them everything in one fell swoop.
Types of beneficiaries
In your will, you can leave specific instructions about the order you want people to inherit your assets. There’s three different types of beneficiaries you can specify.
- Primary beneficiary: this is the person or organization you want to receive your assets first.
- Secondary (Contingent) beneficiary: for lack of a better term, this is the backup beneficiary. This person or organization would receive the assets of your estate if your primary beneficiary can’t. This could be because the primary beneficiary predeceased you or they chose not to receive that assets you left.
- Residual beneficiary: This person will receive any assets in your estate left over after all other benefits have been distributed. You can leave multiple residual beneficiaries and designate the percentage of your estate that each of them should receive.
Who can be a beneficiary?
The long and short of it is, you have options.
Your beneficiary can be any of the following:
- Any person, including a husband or wife, partner, children, extended family members or just a friend you met last week. Basically, it’s your stuff you can leave it to whoever you want.
- A charity or nonprofit: you can donate any or all of your estate to a charity or nonprofit like a church, a college or school, a charity like St. Jude or the ASPCA or even your own foundation if you have one. The options are almost limitless.
- A trust. If you have a trust, you’ll likely want it to be the beneficiary of your will, otherwise, what was the point.
When you do choose a beneficiary, remember, minor children (people under 18) generally can’t own property. In other words, if you have or wish to leave property to minor children, you’ll probably want to name a financial guardian to watch over them and manage their inheritance until they are of age. If you plan on passing along a substantial amount of money, you may want to consider setting up trusts to manage the money until children reach an age that you deem “mature.”
Finally, if you’re married at the time of your death, almost all states have laws that mean your spouse should inherit a minimum amount of your estate. If you want to give a larger part to someone other than your spouse, you’ll need to discuss that with an attorney that specifically handles large estates.