What Is a Beneficiary?

What Is a Beneficiary?

Customarily, a beneficiary is a person in which receives earnings or benefits from something. In the insurance realm, Men and women commonly use the terminology beneficiary to refer to the inheritor of life insurance earnings. Those who receive distributions from a trust, will, retirement pensions, or retirement accounts, are beneficiaries too.

Primary Takeaways

  • A beneficiary is a person who acquires the benefits of something left to them by another person.
  • People or institutes (for instance charities, nonprofits, or trusts) could be beneficiaries.
  • There are beneficiaries for life-insurance plans, wills and/ or trusts, and from time to time retirement accounts.
  • Appointing family members or close friends as beneficiaries is a way of protecting their future financially.
  • Should minor children be beneficiaries, it might be a good idea to establish a trust for them.

Understanding What Beneficiaries Are

You can appoint any person or entity as a beneficiary. They are the entities or people who receive the earnings or disbursements from your will or financial accounts. You can place various stipulations on the payments of funds, for instance a minimum age stipulation. Beneficiaries don’t have to be physical individuals. They are allowed to be entities such as charities, trusts, or non profit organizations.   It might be necessary to appoint beneficiaries for the following purposes:  

  • You have a life insurance policy and need to appoint somebody to receive the proceeds.
  • You would like to appoint someone to receive trust fund distributions.
  • You have retirement accounts, and you wish for someone to name someone else to inherit the funds.
  • You need to select who would receive your assets through your will.
  • You wish to appoint someone to get annuity disbursements in the event of your death.

Who Should You Appoint as Your Beneficiary?

People often appoint those who are closest to them as their beneficiaries. Some instances of beneficiaries are:  

  • Close family members, for instance a spouse or children
  • Other loved ones or close friends
  • Your children’s guardians
  • A trust
  • A charity or non profit you want to support

When appointing beneficiaries, you should consider whether people in your life would face financial hardships if you were to suddenly expire. If they would, this is just one reason to take care of them by appointing them as a beneficiary. This is notably true in the case of life insurance. One reason people usually buy a life insurance policy is to be certain that their loved ones can still manage daily expenses in case of their death. A lot of parents buy life insurance as a safeguard to provide for their children, regardless of a minor or adult.

As we post later, retirement plans and some annuities enable you to appoint beneficiaries. In this way, should you expire prior to utilizing your full retirement or annuity benefits, your family members are going to be provided for. This is another way to produce financial safety for your family. In addition, you are going to benefit from the peacefulness it is going provide you with.

When listing your beneficiaries, you should be as detailed as possible. This aids in avoiding confusion or false identity. For making sure you’re doubtless, you should be required to include your beneficiaries’ full names (first, middle, last) and their social security numbers. You want to make sure no mix-ups should you have an ex-spouse, adopted child(ren), step-child(ren), or other specific circumstances. Being detailed regarding your wishes aids in avoiding disputes amongst loved ones in the future.

Your Beneficiaries Are Your Minor Child(ren)

When there are minor children, there are special attentions to appointing beneficiaries. Minor children can’t simply get life insurance pay outs or inheritances as adults do. When a minor child(ren) are beneficiaries of life insurance policies, the gains are going to go to their legal guardian. Contingent on state laws, the same is typically true if minor children are beneficiaries of significant inheritances.

For working around this dilemma, you might choose to establish a trust. You then can make the trust the beneficiary of your life insurance policies or will. This way, the gains would go into the trust for your child(ren). Your trustee then would administer that trust fund for your minor child(ren). When you go this way, make sure you decide on someone you think can govern this responsibility. Its wise if you considered whether this person is dependable enough to manage your child’s financials.

Retirement Plan Beneficiaries

Retirement accounts generally enable account holders to appoint a beneficiary. That way, if the account holder expires before using their funds, they can appoint another individual to receive the gains.

Being appointed a retirement account beneficiary comes with tax considerations. A beneficiary that is a spouse of a qualified retirement plan like an individual retirement account or 401(k) might be able to add a retirement plan inheritance into their account for tax purposes.

For beneficiaries that are non-spousal, the options are more minimal. There was a amendment in the law in 2019 referred to as the SECURE act. This law now requires non-spouses that inherit qualified retirement accounts to take allocations equal to the whole account value inside of 10 years.

Inherited retirement plan tax laws can get convoluted, particularly following the passage of the act. These laws are always evolving, so the law might change again. If you have inherited a retirement plan and have concerns about overseeing it, it is a wise idea to talk to an attorney.

Annuity Beneficiaries

An annuity is an insurance device that provides a routine source of income throughout retirement. These allow you to invest capital now and receive payments later on. The premiums you pay for your these are generally invested into a mutual fund. However, there are other alternatives too. You will most likely pay higher fees for annuities than you are going for other retirement planning tools.

Different annuities provide different forms of pay out plans. With some annuities, payments conclude when the owner of the annuity expires. Other forms, there is possibility for a spouse or beneficiary to collect pay outs following the owner of the annuity passing. This is another thing to keep in mind when you are in search of an annuity. The pay out plan options will be set out in the initial contract you sign.

Maybe you are in search of an annuity that will continually provide for a spouse or other beneficiary after you expire. In that situation, you should discuss that with your financial advisor or another financial consultant. When the account increases in worth, there can be owed taxes for annuity beneficiaries. This is a field in which an estate planning attorney’s knowledge can be helpful.

Life Insurance Beneficiaries

Life insurance is a crucial estate planning implement. As parents, their life insurance offers them peacefulness. They understand that if they were to pass away, their children are going to be provided for. Life insurance also presents tax benefits over other forms of inheritance. Earnings from life insurance are not going to be taxed because they are not deemed as income.

Can I Change Life Insurance Beneficiary Appointments?

This frequently asked questions answer may be either yes or no. It depends on the types of life insurance beneficiaries you have (Whether revocable or irrevocable).

Revocable Beneficiaries Opposed to Irrevocable Beneficiaries

Revocable Beneficiaries: A lot of life insurance policies itemize revocable beneficiaries. Meaning the policyholder can change their beneficiaries and rescind their policy altogether if they wish to. They are required to file paperwork through their life insurance company. Changing beneficiary appointments is a vital thing to do when your circumstances change. You might need to change a beneficiary appointment if you endure a divorce, when a beneficiary pass away, or if you begin a trust. If you have gone through a substantial life event or a lengthy period has passed since you appointed your beneficiaries, it could be time to review your choices and your plans for your future.

Irrevocable Beneficiaries: These life insurance policies having irrevocable beneficiaries are slightly more involved. If you have an irrevocable beneficiary, you cannot change beneficiaries without their approval. Your existing beneficiary and any alternate beneficiaries would need to approve the change. In this regard, these types of beneficiaries are just about guaranteed to collect earnings from the life insurance policy unless they agree to be dismissed. When you’re adding irrevocable beneficiaries to your life insurance policy, you need to be sure regarding them. Consequently, people occasionally appoint their child(ren) their irrevocable beneficiaries.

Primary Beneficiaries Opposed to Contingent Beneficiaries

The two chief types of beneficiaries are (1) primary beneficiaries and (2) contingent beneficiaries. The primary beneficiary is the initial person (or entity) to collect the pay outs from a life insurance policy, will, retirement account, trust and so on. When this person is available to collect an inheritance, or a pay out it will go to them.

Contingent beneficiaries (or secondary beneficiaries) are stand in beneficiaries. They collect the earnings only if the initial beneficiary has expired, unavailable, or turns down to collect the earnings. People typically appoint an entity as secondary beneficiaries. That way, when your primary beneficiary expires prior to you, your preferred charity can collect the pay outs.

It’s sensible to list contingent beneficiaries due to the fact it can stop family discord after you die. As an example, in the case where your primary beneficiary is your spouse. If your spouse expires prior to you and you have appointed a trust as the contingent beneficiary, it will stop your children from squabbling over the earnings. The earnings will be in the trust that you appointed as your contingent beneficiary. The trustee you have chosen will then allocate the trust funds in the best interests of the beneficiaries of the trust.

You are able to list multiple contingent beneficiaries on your life insurance or retirement plan. Should you do this, you need to list the percentages each of your contingent beneficiaries should collect. By all means, the whole percentage should add up to one hundred.

How an Attorney Can Help

Tax laws on inheritance, retirement accounts, and life insurance policies can get tricky. The laws are also consistently changing. Whether or not you are the beneficiary of an inheritance or are preparing for your family’s future, an estate planning attorney can surely help.


  1. Kimberly Lekman, E. (2022, December 20). What is a beneficiary? A simple explanation. FindLaw. Retrieved December 28, 2022, from https://www.findlaw.com/forms/resources/estate-planning/what-is-a-beneficiary.html

Need an Affordable Trust Lawyer in Scottsdale?

Moshier Law should be your choice when you need the best will lawyer in Scottsdale. An experienced family law attorney will work with you to obtain the best possible outcome in your situation. We advocate for our clients so they have the brightest future possible. Give us a call today at 480-999-0800 for a free consultation.

Moshier Law services all of Phoenix and Scottsdale, Arizona. Jennifer and her team of professionals seek to resolve Family Law cases efficiently with your goals in mind. Call us today! 480-999-0800 Schedule A Consultation
Jennifer Moshier Collaborative Divorce Lawyer Scottsdale Arizona
Jennifer Moshier, Scottsdale Divorce Lawyer

[gravityform id=”2″ title=”false” description=”false”]

Recent Posts



Finding the right mediator can be difficult.


Divorce and Family Law

When a case demands litigation, you’ll have the benefit of 19 years of litigation experience in California and Arizona. But when a case demands collaborative law, or mediation, we can meaningfully describe why collaborative law or mediation may or may not be your best option.

Moshier Law services all of Phoenix and Scottsdale, Arizona. Jennifer and her team of professionals seek to resolve Family Law cases efficiently with your goals in mind.

Jennifer Moshier, Scottsdale Divorce Lawyer

Trail Potter  –  Divorce  Lawyer

Moshier Law - Phoenix Divorce, DCS and CPS, Custody, Estate Planning, Probate, and Adoption Lawyers