What Is a Beneficiary? Meaning, Types and How to Name

A beneficiary can receive the benefit of a life insurance policy or assets from a deceased person’s estate.
Dalia Ramirez
By Dalia Ramirez 
Edited by Tina Orem

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What is a beneficiary?

A beneficiary typically refers to a person or entity who receives the death benefit of a life insurance policy. However, you can also name beneficiaries for retirement and investment accounts, property or other assets using a will or trust

Merriam Webster. Beneficiary definition. Accessed Jun 14, 2023.

Beneficiaries can be people, charities or even a trust. Naming a beneficiary is an essential part of estate planning; if you don't name one, your loved ones could go through a time-consuming court process called probate to determine where your assets go.

If you’re a benefactor — the person who owns the assets — you can specify how your assets should be distributed, including requiring a beneficiary to reach adulthood before receiving property.

How to choose a beneficiary

  • You can choose one beneficiary or split your assets among multiple beneficiaries. You don’t have to leave everything to one person.

  • You can name a contingent beneficiary (sometimes called a secondary or alternate beneficiary). This person inherits your assets if the primary beneficiary — usually a spouse or someone else who would suffer financially if you died — dies before you do

    Cornell Law School. contingent beneficiary. Accessed Sep 15, 2023.
    . Life insurance and retirement accounts often require you to name a contingent beneficiary.

  • Your state of residence or insurance provider may restrict whom you can name as a beneficiary for life insurance. In some states, you may have to list your spouse as your primary beneficiary and allocate at least 50% of the benefit to them; in some places, you’ll need your spouse’s written permission to name someone else as a beneficiary on the account.

  • You can designate a trust as a beneficiary. A trust is a separate legal entity that gives you greater control over the distribution of your assets and can help you navigate tricky estate situations, such as naming a minor or dependent as the beneficiary.

  • You can name a charity or nonprofit organization as a beneficiary to receive all or part of your assets.

  • Your beneficiary can be revocable or irrevocable. You can change a revocable beneficiary without the beneficiary’s permission if the policy owner (the benefactor) is still alive. An irrevocable beneficiary can’t be changed without first getting written permission from the beneficiary. If there are multiple beneficiaries, all parties must consent to any changes. Irrevocable beneficiaries may be required as part of a divorce settlement or other special circumstances.

» Deciding on a beneficiary? Here’s what else to consider

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How to designate a beneficiary

It’s a good idea to designate beneficiaries for all your important assets. Here’s how:

  • For insurance and other accounts, the provider will usually ask you to name a beneficiary when you open the account, but you can fill out a form online or in person to designate or change beneficiaries at any time. Contact your insurance provider or financial institution to request the necessary forms.

  • For property and the rest of your assets, you can name your beneficiaries in your will or trust. You might also be able to control who inherits specific pieces of real estate via a Lady Bird deed, a transfer on death (TOD) deed or a revocable living trust.  

🤓Nerdy Tip

Provide as much information as possible to avoid future confusion or legal conflict. Include your beneficiaries’ Social Security numbers and full names, especially if you have a complicated family situation, such as an ex-spouse or adopted children.

» Ready for estate planning? Here’s how to get started

How to change a beneficiary

Generally, you can change your beneficiaries at any time. It’s good to review your will after a significant life event, like a marriage, divorce, death of a loved one or the addition of children or grandchildren. Here’s how to make changes, depending on the account:

  • On a life insurance policy, you can change your beneficiaries by contacting your insurance provider. You may have to fill out a form to confirm your change. Your policy may state whether you named a beneficiary revocable or irrevocable. You will need your beneficiary’s consent to change their status if irrevocable.

  • With a financial account like a retirement or investment account, contact the financial institution. If you receive benefits through your employer, you’ll likely have the opportunity to revisit your policy choices during the annual enrollment period.

  • In your will, you can change a beneficiary by adding a codicil, a legal document that modifies your will. Laws vary depending on your state, but you’ll typically need two witnesses to certify a codicil. If you’re making major changes, consider creating a new will and destroying the old one.

Frequently asked questions

In most cases, a beneficiary designation overrides a will. So if you change your will but don’t update your life insurance policy and other beneficiary designation to match, the assets may still go to the original beneficiary.

Sometimes, but there are legal limitations. Most life insurance and IRA accounts don’t allow you to name a minor as a beneficiary, and in most cases, minors can’t inherit property or other significant assets directly.

If the child is still under 18 when you die, the assets may go to their legal guardian until they come of age, or a court may have to appoint a conservator to manage the funds.

It may be helpful to set up a trust, which can serve as the beneficiary in the child’s place. The terms you set in the trust can outline how your assets will be distributed over time.

If you have a lifelong dependent, such as a child with functional needs, you can set up a specific kind of trust that can ensure their financial security without disqualifying them from government assistance. With that legal structure, your child may be able to receive the benefits they need.

If you don’t name a beneficiary, the benefit payment from your insurance might be delayed until the company or state court determines where it should go. Most life insurance policies have a default payment order and may end up paying out to your estate.

If this happens, your loved ones may have to go through probate, which is the legal process of distributing your property after you die. This process can be lengthy and costly, so it’s best to avoid it by making your wishes as straightforward as possible.

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