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The most important part of estate planning is working out who receives your wealth when you die. Any people you decide to leave money or possessions to are referred to as your beneficiaries. You may also want to donate money from your estate to charity.
What is a beneficiary?
A beneficiary is the person, or people, you choose to inherit your money, property and possessions. This includes your savings, investments and pensions.
You can have one beneficiary or a few, and they should be named in your will. You can also add beneficiaries to your pensions, investments, savings and life insurance policies.
You may choose beneficiaries based on their need, or you may have possessions that 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 will be your beneficiary.
» MORE: How to write a will
What is an executor?
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 your estate will generally need to cover the cost of employing a professional as an executor.
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. They will 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 granted. 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.
For probate rules in Scotland and Northern Ireland, go to Scottish Courts and Tribunals Service and nidirect.
Can an executor also be a beneficiary?
An executor can also be a beneficiary of the will, or even the main beneficiary, such as a son or daughter of a parent who has passed away.
An executor can also act as a witness for a will if they are not also a beneficiary. Witnesses and their married partners can’t stand to inherit anything from a will they are signing.
How do the rules of intestacy work?
If you die without a valid will, the rules of intestacy will dictate who will be the beneficiaries of your estate. The rules are quite complex, but they generally work as follows.
If you are married or in a civil partnership, your surviving spouse or civil partner will inherit all your assets including property, up to the first £270,000 of your estate, as well as any personal possessions. They will also be entitled to half of any amount above that. The remaining half will then go to any surviving children.
If you are not married or in a civil partnership, but do have children the estate will be distributed equally among your children. If you have no children or spouse, where your estate is distributed will depend on who your living relatives are, such as parents, siblings, grandparents and aunts and uncles. If you have no living relatives, the money will go to the Crown.
If you have a partner and you’re not married or in a civil partnership, no matter how long you’ve been together, they would inherit nothing under the rules of intestacy. In this case, it is especially important to make a will.
Can a trustee be a beneficiary?
They can, but they don’t have to be. For example, you may decide to set up a trust as part of your estate plan, which 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 attorney also be a beneficiary?
You may choose to put in place a power of attorney in your lifetime 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 a 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
How do you change your beneficiaries?
You can change the beneficiaries in your will at a later date. It is a good idea to keep your will up to date and review it regularly – at least every five years or after a major life event. For example, you might want to add or change beneficiaries if you remarry, have children or grandchildren, get divorced or move house.
The clearest way to update your will is to create a new will and destroy the old one by shredding or burning it.
You could add a codicil rather than write a new will, 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 two people, as you would with a new will.
When creating a new will or codicil, make sure you include a clear statement that it revokes any previous versions.
Some insurance policies will detail whether you name a beneficiary revocable or irrevocable. If it is revocable, you can change the beneficiary by filling out a form at a later date.
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