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What is a Beneficiary?

A beneficiary is a designated recipient of retirement savings, a life insurance policy, or assets designated through a will. This is usually one (or more than one) family member, but a beneficiary can also be a nonfamily member, a trust, a charity, or an estate.

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Choosing your life insurance beneficiary

Who should your beneficiary be? A life insurance policy exists to financially protect your loved ones. It’s not an easy situation to think about, but making a smart plan is important to protect your family in case something happens to you.

You can split up your benefit however you choose. You can even elect backup or “contingent” beneficiaries to receive funds should your primary beneficiary predecease you. Courts may charge fees if they must rule on a dispute. So it’s important to be as clear and concise as possible with the way you want your assets distributed to avoid confusion and delays.

Depending on your wishes, this could begin to get complicated—quickly. The good news is that you don’t have to figure out all of this on your own. Our agents are experts, and they can walk you through each step, helping you carefully consider your options, so you can be sure your loved ones are taken care of exactly as you intended.

 

What information do I need to select a designated beneficiary?

There’s no single answer to this question. It depends on your particular life insurance policy or will. To start, you’ll need to provide the beneficiary’s full legal name and relationship to you (child, spouse, father, brother, etc.). 

Providing as much information as possible will ensure that there is no confusion about your wishes, that your beneficiaries can be found, and that your benefits will be distributed in a timely manner. 

If you can, add information such as:

  • Mailing address
  • Email address
  • Phone number
  • Date of birth

 

What happens if I don’t elect a beneficiary?

If you don’t specify whom you want to receive your benefits when you pass away, your assets will enter a legal process that differs by state. Each state has different laws on the order of inheritance, and a court must figure out how to distribute your funds. This can lead to significant delays and confusion among your relatives at a time of grieving. It can also lead to court fees, possible taxes, and payments that reduce the amount your family receives. For life insurance policies, your benefits will generally go to your spouse first—then, in order, to your children, your parents, your siblings, and, finally, your estate.

 

Can a spouse override my life insurance beneficiary?

If your beneficiary information is thorough and there are no mistakes in the documentation, it is very difficult for anyone to change your intended wishes. When issues arise, it is usually because it isn’t clear who should receive a benefit. This could happen because of poor wording or, more often, because something changed that was not considered in your will.

Example

Your will states that 50% of your assets should go to your spouse and 25% to each of your two children. If one child predeceases you and is unable to collect a share, what happens? Do you want that 25% split equally between the other beneficiaries? Do you want all of it to go to your other child? Do you want it to go to your spouse? Do you want it to go to the spouse or the children of your deceased child? Without proper documentation, a court may have to decide.

Situations like this can lead to confusion and potential legal battles over your assets. The best way to make sure there are no mistakes and that most eventualities are covered is to consult a life insurance agent or an estate attorney.

 

Can I change my designated beneficiary later on?

Usually, it’s a simple process to change your life insurance beneficiary, and you’re encouraged to keep your beneficiaries up-to-date as your life changes. There are certain legal instances when a beneficiary cannot be changed, but these are rare. If you’re unsure of how to update your policies, an agent will be able to point you in the proper direction.

 

When should I consider updating my beneficiaries?

You can make changes whenever you like, but major life events are often a good time to reevaluate your policy and your beneficiaries. If you’ve recently married, divorced, lost a loved one, or welcomed children or grandchildren, that may change the way you want your wealth to be distributed when you pass away.

We also understand that this is not something you think about every day, and it shouldn’t be. So, we recommend adding a yearly calendar reminder to check in and consider your options.

 

Am I a life insurance beneficiary?

The months after losing a loved one are never easy. There are many difficult tasks that need to be completed in a time of grieving. One of them is to learn if the deceased had a will, a life insurance policy, or other assets that need to be properly distributed.

To find out if you are a beneficiary of a will or a life insurance policy after your loved one has passed away, there are a number of steps you can take:

 

Ask the executor or family attorney

If the deceased has named an executor of the estate, that person should have information on life insurance policies and how assets should be distributed.

 

Search the probate courts

Wills and other funds often go into a legal process called probate, in which a court helps decide how assets are split according to local laws. Generally, the county court district where the deceased last lived is the first place to look for information.

 

Search online

If money goes unclaimed, insurers are required to transfer it to a state-run account. There are many ways to search these records online for free. You can then contact the state’s unclaimed property office and start the process to claim your funds.

 

We can help

If you think  you may have been mentioned in a will or there are life insurance funds due you that you haven’t received, don’t give up. With the right help, you can claim what’s yours. Our agents understand the life insurance process and have helped countless individuals. We can help you, too.

Related: Learn more about life insurance

 

Should I have a life insurance policy?

By simply asking this question, you are taking the first step to make sure your family is protected when you pass away.

Many employers offer small life insurance policies as a benefit, but that may not be enough to ensure your family’s stability after you’re gone. Considering additional protection is an important part of everyone’s financial journey.

If you would like help creating a will or adding a life insurance policy, talk to an agent. They will help you carefully consider all of your options and align your goals, so your wishes are clear, and your family is protected for the long term. 

Related: 5 Reasons to Consider Whole Life Insurance

 

Frequently asked questions

There are two types of beneficiaries typically referred to in legal and financial contexts:

 

1. Primary beneficiary: This is the individual or entity designated to receive the benefits of a will, trust, retirement account, or life insurance policy when a policyholder or account owner passes away. The primary beneficiary has the first claim to the asset or benefits.

 

2. Contingent (or secondary) beneficiary: This beneficiary is second in line to receive the benefits, but the right to do so is contingent on the primary beneficiary’s being unable or unwilling to accept the benefits. This could be due to the primary beneficiary’s passing away, becoming incapacitated, or refusing the inheritance before the benefits are distributed.

Yes, a minor can be named as a beneficiary; however, minors cannot legally control property or financial assets until they are old enough to be responsible for these benefits. A guardian, a trust, or a custodian under the Uniform Transfers to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA) must be appointed to manage the assets until the minor reaches adulthood. These legal mechanisms are put in place to ensure that the assets are used for the minor’s benefit. Uses for the minor’s benefit include educational expenses and living expenses.

A beneficiary identification code (BIC) is a code used by Social Security and other government programs to identify the type of benefits a recipient is receiving. Each type of benefit is assigned a different code. For instance, in the context of Social Security, these codes can indicate whether the benefits are for a retiree, a disabled worker, a widow, a child, or another type of beneficiary. These codes are used internally for administrative purposes to help manage and track benefit accounts.

If you’re unsure whether you’re a beneficiary of a will, a trust, an insurance policy, or a retirement account, you will typically be informed by the executor, trustee, or the financial institution managing the account. Should you not receive any communication but believe you might be a beneficiary, you can review the deceased’s important documents, contact the relevant financial institutions directly, or consult with a probate court once the will enters probate, as it then becomes a public record. If necessary, seeking legal counsel can also help clarify your beneficiary status.

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