 Sam
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 Posted: Thu Apr 15, 2004 2:19 am Post subject: Beneficiary |
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A beneficiary is a person or a legal entity who receives monetary or other benefits from another person regarded as the benefactor. The beneficiary may be assigned to receive benefits from insurance policy, will, deed or trust.
In case you are a beneficiary who is entitled to receive benefits after the death of a person, then providing your name as an heir in the will is not enough. Certain assets like pensions also require the name of the beneficiary as a successor.
On a life insurance policy, one can name a beneficiary for receiving the benefit, that is, the amount of insurance after the death of the insured. But in case no beneficiary is named, such death benefit will be offered to the estate of the concerned person.
In case of property trust, the persons with equal rights of ownership of the trust assets are the beneficiaries although the legal title is held by the trustee. The term beneficiary in such a case is used in a letter of credit which confirms that the beneficiary will be receiving certain benefits. But the beneficiaries of a legal will are, known as "devisees" or "legatees".
If the primary beneficiary is not alive or do not qualify as per the restrictions in the legal contract, then a group of beneficiaries may be considered to decide where the assets should rightfully go. Such individuals are known as contingent beneficiaries.
The choice of a beneficiary is crucial. Here are some tips to help you while you choose a beneficiary.
- One's estate should not be named after a beneficiary as it may involve one's assets going through a probate leading to much hassles in future.
- Minors should not be considered as beneficiaries because legally children (minors) cannot control assets and a guardian needs to monitor their activities. In such cases, the guardian can be regarded as the beneficiary or maybe a trust can be set up.
- One must realize the limitations of a will and act accordingly while deciding as to who should be the beneficiary.
- One should also decide upon the proportion of assets that should be distributed to each beneficiary.
- One should be able to decide the type of assets that are suitable for providing benefits to the beneficiaries.
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