Choosing beneficiaries is a very important aspect to consider in estate planning. But what exactly is a beneficiary? Read on to learn more.
What Is a Beneficiary?
A beneficiary is the person or organization that receives money, property, or another item of value from a will , trust, or other asset. Beneficiaries can be individuals, such as your children, parents, or spouse; organizations such as a charity or religious institution; or a combination of individuals and organizations.
When you create an estate plan, you must identify who your beneficiaries will be and what you want them to receive. Choosing the right beneficiaries is an important part of estate planning and can help ensure your assets are distributed according to your wishes after you die.
What Happens if the Beneficiary Passes Away Before Receiving Their Inheritance?
If the beneficiaries named in your estate plan documents die before receiving their inheritance, the assets will be distributed according to the terms of the document. In many estate plans, it is customary to setup a contingent beneficiary or secondary beneficiary to account for your assets if the primary beneficiary pre-deceases you.
If there is no backup distribution plan beyond the primary beneficiary, the assets will be distributed according to state law, which can vary from state to state. In most cases, the assets will go to the deceased person's spouse or children. However, if the deceased person was unmarried or had no children, the assets will go to his or her parents or siblings. In some cases, the assets may go to a more distant relative. If there are no living relatives, the assets will go to the state. As a result, it is important to carefully consider who you name as a beneficiary in your estate plan.
What Happens if You Don't Have an Estate Plan?
Without an estate plan, the state will determine how your assets are distributed, which may not be in line with your wishes. An estate plan can also specify who will make decisions on your behalf if you become incapacitated. This can be especially important if you have young children, as it ensures that they will be taken care of by a trusted individual. While creating an estate plan can be difficult to think about, it can provide peace of mind knowing that your affairs are in order.
Contact an Estate Planning Attorney Today
A beneficiary is a person or entity who receives the benefits of a will or trust. Beneficiaries can be individuals, charities, or other entities. When you are creating an estate plan, it's important to think about who you want to receive your assets when you die. You can choose specific people or organizations as beneficiaries, or you can create a “pour-over will” that transfers your assets to another account after you die. If you have questions about beneficiaries and estate planning, contact us at Heritage Law Office at 414-253-8500 or send us a message. We would be happy to help!