What Is a Beneficiary and Who Can Be One?
A beneficiary is a person or people that you choose to leave your financial and physical assets to when you die. Learn what you need to know about beneficiaries and how they differ from executors and trustees.
The most important part of estate planning is working out who receives your wealth when you die. Any people – or perhaps organisations – you decide to leave money or possessions to will be referred to as your beneficiaries.
What is a beneficiary?
A beneficiary is the person, or people, you choose to inherit your money, property, or possessions, including your savings, investments and pensions.
You can have one beneficiary or many, and they should be outlined in your will.
» MORE: How to write a will
You may choose beneficiaries based on need, or you may have possessions that you believe are best suited to certain friends or family members. Alternatively, you may decide you want your estate to go to charity, in which case the charity becomes your beneficiary.
What is the difference between a beneficiary and executor?
Beneficiaries are different to executors. An executor is an individual or several individuals who you appoint to oversee your estate when you die. They may be friends or relatives, or a professional such as a solicitor, though you will have to pay a fee from your estate to employ a professional as an executor.
Depending on how much money is in your estate, your executor may have to apply for probate when you die. This is a legal process required to release your funds, at which point an executor oversees the administration and shares out the money, possessions or property in the estate to beneficiaries.
The executor is also responsible for notifying the beneficiaries shortly after the person who wrote the will dies, to let them know what their entitlement is, even if it then takes a while, because of delays over probate, to receive their inheritance.
The beneficiaries don’t have a right to see the will until probate has been obtained.
There is no definite deadline of when beneficiaries will receive their inheritance but if a beneficiary doesn’t believe an executor has behaved properly, or is stalling, they may bring a legal challenge.
An executor may also be a beneficiary of the will, or even the main beneficiary.
You must, however, get your will witnessed by two independent people who are neither the executor or a beneficiary.
How do the rules of intestacy work?
If you die without a will the rules of intestacy kick in instead, and dictate who will be the beneficiaries of your will. If you are married it will be your spouse, your children, or if you have no children or spouse, your next of kin, such as parents or siblings. If you have no living relatives the money will go to the Crown.
It is not just in your will that you appoint beneficiaries.
If you have pensions, investments, savings or life insurance policies, you should stipulate who you’d like to inherit them when you die.
Some insurance policies will detail whether you name a beneficiary revocable or irrevocable. If revocable you can change the beneficiary by filling out a form at a later date.
You can also change the beneficiaries on a will.
It is a good idea to keep your will up to date, and you might want to add or change beneficiaries if you were to remarry, have children or grandchildren or get divorced.
The clearest way to do so is to create a new will and destroy the old one by shredding or burning it.
You could also add a codicil, though these tend to be recommended only for small changes as they make a will more complicated. To add a codicil you need to get it witnessed by at least two witnesses as you would a new will.
When creating a new will make sure you include a clear statement that it revokes any old will or codicil.
Can a trustee be a beneficiary?
You may decide to set up a trust as part of your estate planning and will require a trustee to take responsibility for it. The trustee does not inherit your money, instead they manage your money and assets such as property on behalf of a beneficiary until they receive their inheritance.
You might decide to set up a trust for a relative who is vulnerable, for example, who you would like to benefit from your estate but who may not be able to manage their inheritance themselves, or you may want children or grandchildren to reach a certain age before they inherit.
Can an executor be a beneficiary?
While you are still alive you may choose to put in place a power of attorney, so that someone else can manage your money or health decisions if you lack capacity.
This person is known as an attorney. They may also be your beneficiary in your will, but they are not automatically entitled to be just because they are your attorney while you are alive.
» MORE: Power of Attorney
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Laura is a journalist and author, writing about money since 2008. Including writing for The Times for 9 years. She believes finance doesn't need to be complicated. Author of Money: a user's guide. Read more