Whether you’re writing your own will or settling someone else’s, the term “beneficiary” is bound to come up at some point. “How do you know if you are a will’s beneficiary?” Is it going to cost you anything to be a beneficiary? Can an executor be a beneficiary?”And what happens if a person dies without having made a will?” These are some of the questions addressed in this post: Continue reading…
What does the term ‘Beneficiary’ mean?
A beneficiary is a person who is set to inherit something from someone else’s estate when that person dies. This could be money, goods, property, stocks, or shares—anything left behind by the deceased.
That is the most fundamental meaning of beneficiary. Another term you may come across is ‘residuary beneficiary.’ This is the person who will get all or a portion of an estate once all obligations, taxes, and specific gifts have been paid.
What is the Beneficiary in a Will?
A beneficiary is someone named in your will or revocable living trust to receive property from your estate when you die. You have the option of naming specific beneficiaries to receive any assets in your estate, including real estate, financial accounts, and other assets.
Types of Beneficiaries
You can specify the order in which you want your assets distributed to your beneficiaries in your will. The following are the various types of beneficiaries you can name:
#1. Primary Beneficiary
The primary beneficiary is the person or organisation that is first in line to receive assets from your estate.
#2. Contingent (or secondary) beneficiary:
This person or organisation is the next in line to collect assets from your estate if your primary beneficiary is unable to do so. This could happen if your principal beneficiary, for example, died before you or declined the assets you left to them (a process known as “disclaiming” or “renouncing”).
#3. Residuary beneficiary:
This beneficiary will get any remaining assets in your estate after all explicit gifts and debts have been paid. You can identify more than one residuary beneficiary and specify the percentage that each should receive if you like.
Who is Eligible to receive a Beneficiary?
When it comes to selecting a beneficiary, you have numerous alternatives. They could be:
- Anyone, including your spouse, domestic partner, child(ren), family members, or friends. It is not necessary to be connected to someone in order to include them as a beneficiary in your will.
- A charitable organisation or a non-profit organisation. Many individuals are unaware that they can leave a portion of their estate to charity in their will. It’s a meaningful, effective approach to leaving a lasting legacy for yourself as well as for causes close to your heart.
- A belief. If you have a revocable living trust, you should probably also have a pour-over will. The goal of the will is to “capture” any property that was not transferred to your trust while you were still alive. After you die, the property is “poured over” into your trust. Simply name your trust as a beneficiary in your will to do this.
If you’re married, every state has rules that guarantee your spouse a set amount of your estate. If you intend to leave a major portion of your assets to someone other than your spouse, you should consult with an estate attorney to ensure that your estate plan complies with state law.
Is it possible for a Minor to be Named as a Beneficiary in a Will?
A minor can be a beneficiary of an estate; however, the minor is not entitled to the gift or portion of the estate until they reach the age of 18. This is due to the fact that a minor is not considered to have the necessary ‘capacity’ to accept a gift until they reach the age of majority and attain full legal capacity. Until a beneficiary reaches the age of 18, the monies or assets left to them are held in trust by trustees appointed in the will.
The testator (the person writing the will), especially if they are the minor’s parents, can include a letter of wishes alongside their will. This letter of wish can specify how the assets should be invested or used for the minor’s benefit while held in trust. In certain cases, the inheritance may be paid to the minor’s parents. However, this is subject to the conditions of the will and/or statute.
When creating a will, parents should consider whether they will have any further children in the future. If a parent is thinking about having additional children in the future, it’s a good idea to leave a gift or share of a residuary estate to my children rather than including names. This will save you from having to modify your will later. Furthermore, if a person desires to include stepchildren, they must refer to them as such in the will; otherwise, they will have no inherent entitlement if the will merely refers to my children.’
What Property can you Leave to a Beneficiary in your Will?
You can specify a beneficiary in your will for any property that is part of your probate estate. This includes the following:
- Real estate, such as your home and other real estate you own (for example, a vacation property),
- Cash, stocks, bonds, and personally owned bank accounts are examples of financial assets.
- Vehicles, jewels, artwork, furniture, and clothing are examples of personal property.
- Pets (they frequently seem like part of the family, yet they are legally considered property)
- Family heirlooms or personal things, such as a china set passed down over many generations
Can a Beneficiary of a will be an Executor?
When writing a will, many individuals wonder if an executor can also be a beneficiary. Yes, it is very typical (and legal) to name the same person in your will as both an executor and a beneficiary.
What is the Difference Between a Beneficiary and an Executor?
Beneficiaries are the people you wish to inherit your possessions (also known as your estate) after you die. As a beneficiary, you can name anyone you wish, including your spouse, children, relatives, friends, or charities.
There are various types of bequests you might make to your beneficiaries. You can leave a specified amount of money, a specific item, or a portion of your estate after all debts and other gifts have been paid.
Executors are the people you want to be in charge of your estate when you die. Most people appoint one or two executors, although up to four can serve simultaneously. It’s a good idea to name more than one executor or a replacement executor in case your first choice is unable to act. Typically, people designate family members, friends, or a professional executor (such as an attorney or accountant) to serve as executors.
Selecting an Executor
Being an executor is a huge responsibility that should not be taken lightly. An executor’s primary responsibilities include:
- communicating with anybody associated with the estate, including those inheriting from it, those due money from it, and any service providers
- requesting a grant of probate from the Probate Registry
- determining the estate’s worth
- calculating tax, submitting tax forms to HMRC, and paying any outstanding tax
- paying any outstanding estate debts
- selling or transferring real estate or other assets
- disbursing your estate to the beneficiaries specified in your will
As you can see, there is a significant amount of legal, tax, and administrative labour involved, and the executor may be held personally accountable if anything goes wrong. As a result, it’s critical to think carefully about who you’ll select as your executor. Your executor should be someone you not only trust but also someone who is competent in carrying out this role when the time comes.
Furthermore, your chosen executor is not required to take up the duty if they do not like to. As a result, if you wish to appoint a family member or acquaintance, it’s important to consult with them first. See How to Choose an Executor When Making a Will for further information.
Appointing a Beneficiary as Executor
A popular technique is to appoint one of your beneficiaries as executor of your will. It’s highly likely that you’ll want to choose at least one of your beneficiaries as executors, and it’s not uncommon for this to be your primary beneficiary.
On the other hand, your executor may not be identified as a beneficiary. Perhaps you want your children to inherit everything, but you want your exceptionally capable friend to operate as an independent executor. This is, once again, entirely appropriate.
Having a Beneficiary serve as a Witness
A beneficiary, on the other hand, should not act as a witness to your will. Neither the beneficiary’s spouse nor the beneficiary’s children should be considered (or civil partners). If a beneficiary acts as a witness, your will is not invalidated, but the beneficiary is no longer entitled to their fortune.
You must sign the will in the presence of two independent witnesses. These witnesses will then be required to sign the will in front of you.
What is the Distinction between a Beneficiary and an Heir?
An heir, also known as an heir-at-law, is someone who is entitled to a portion of your wealth if you die without a will, according to the inheritance rules of your state. This could include your spouse or domestic partner, children, parents, and other members of your extended family.
A beneficiary, on the other hand, is someone you choose to receive a portion of your estate. Assume you name a favourite charity as a beneficiary in your will. This charity is not eligible to inherit from you under intestate law. It would only receive assets if you named it as a beneficiary in your will.
What happens if you don’t leave a Beneficiary Designation in your Will?
If you do not identify beneficiaries in your will, the following possibilities may occur:
- If you do not name a beneficiary for a specific item (such as your vehicle), that asset will be included in your residuary estate. So, if you name a residuary beneficiary in your will, it will be distributed to them.
- Your local probate court will distribute your assets in accordance with state law if all of your beneficiaries pass away prior to you or if you don’t have a will at all. In most cases, your spouse and children will be the first to receive your assets, followed by parents, siblings, and other family members.
- If you die without a will and have no family, the state will inherit your property as a last resort. This rarely occurs since the law is meant to give property to your kin, no matter how far away they are.
Choosing Beneficiaries for Assets that are Exempt from Probate
Certain accounts are often passed on to your beneficiaries outside of your will, without going through the probate process. Non-probate assets are accounts such as life insurance policies, 401(k)s or IRAs, pensions, and some bank accounts. Nominating beneficiaries for non-probate assets is a separate process from naming beneficiaries in your will; you may learn more about that process here.
How to Name a Beneficiary in Your Will
Consider including a list of all of your assets in a separate document when writing your will. Then, pick who or what organisation should receive each item of property and incorporate that information in your will.
It is beneficial to be specific while listing your property. Instead of writing, “My automobile goes to my neighbour, Bob,” write out the vehicle’s make, model, and colour, as well as your neighbour’s entire legal name.
If you are bequeathing assets to a charity, mention the charity’s entire name, street address, and Employer Identification Number (EIN). An EIN is a unique number that the IRS issues to certain business entities. Including a charity’s EIN clarifies which charity you’re donating to. The EIN of a charity is usually available on their website.
How can I find out if I am the Beneficiary of a Will?
Helen: If someone has left a will and you are a beneficiary of the estate, the executor or the solicitor the executor has appointed will normally contact you to advise you that you are a beneficiary. The executor is the person chosen to administer a deceased person’s last will and testament, and their primary responsibility is to carry out the instructions to handle the deceased’s affairs and intentions.
When the executor of the will applies for Probate (the legal and financial processes involved in dealing with the assets of a deceased person), the will becomes a public document, and you can acquire a copy to see if you are a beneficiary of the estate.
What Documentation do I need to Produce as a Beneficiary of a Will before I can get my Inheritance?
As a beneficiary, you may be required to present documentation such as a driver’s licence and a passport to prove your identity and address. Before any inheritance is paid to you, the solicitor will do a bankruptcy search.
How long would it take for an inheritance to be distributed to the beneficiary of a will? Helen: If the estate is straightforward and no property is involved, the process can normally be completed in six months. Where estates are more complicated, such as when inheritance tax is due, the time frame may be 12–18 months.
If you are a beneficiary, you may be able to receive interim payments if the solicitor is holding funds on behalf of their client until the estate is settled. If someone contests the will or challenges it, the procedure can take even longer if the case goes to court. So, if there is a property to sell, this may also cause a delay.
What if I’m not designated as a beneficiary or under the Rules of Intestacy but believe I’m entitled to make a claim?
If you were not named as a beneficiary in a will or under the Rules of Intestacy, a solicitor can assist you in determining if you are eligible to file a claim under the “Inheritance (Provision for Family and Dependants) Act 1975“. Certain types of people may be eligible to lodge a claim against an estate under the Inheritance Act. Spouses, ex-spouses (who have not remarried), cohabitees, children, people treated as children, and dependents are all included.
The beneficiary of a Will FAQs
Can the executor of a will be a beneficiary?
An executor can be a beneficiary of a will, contrary to popular belief. An executor can be a beneficiary, but it is critical that he or she not witness your will, or he/she will not be entitled to his/her bequest under the terms of the will.
How are beneficiaries paid?
A beneficiary can receive a life insurance payout in a variety of methods, including lump-sum payments, instalment payments, annuities, and retained asset accounts.
Can an executor of a will remove a beneficiary?
An executor has no authority to alter the will. This means that the beneficiaries named in the will cannot be removed, no matter how difficult or belligerent they are with the executor.
