Understanding who's considered a beneficiary is vital in your journey towards leaving a lasting legacy when you die.

Death isn’t easy for those left behind.

It comes with countless challenges between mourning a loss, funeral arrangements, and wrapping up an estate.

You can make things simpler for your family by organizing your estate, and the first step towards this is knowing the appropriate terminology.

As experts in the field of equity release, we have an in-depth understanding of all the necessary terminology. We’ve found a simple way to explain complex terminology.

Now, let’s look at who your beneficiaries are...

Defining the Term Beneficiary

A beneficiary is a person, people, or an entity you name in your will and life insurance policies that'll be entitled to receive your death benefits and estate.¹

There are 2 types of beneficiaries that you’ll need to be aware of when setting up your will.

The first is referred to as the residuary beneficiary, who’ll receive a portion of your estate.

The second is known as a non-residuary beneficiary.²

The latter will usually receive a gift, such as a piece of special jewelry, a personal heirloom, or some money.

Be very specific about your beneficiaries when writing your will to avoid confusion between family members.

Use full names, personal/contact details, national insurance numbers, and define your relationship with the beneficiary.

2 Types of Beneficiaries

To further explain beneficiaries, let’s discuss the 2 different types:

Primary Beneficiaries

Primary beneficiaries are the first people named in your will to receive your assets.

When selecting your beneficiaries, it'll serve you to notify the chosen individuals and keep them in the loop about any updates.

You never know how your circumstances could shift and who you’ll want to include or remove from your will.

Pro Tip: Review your will every 5 years to ensure you’re still happy with your choices.

Contingent Beneficiaries

If any of your primary beneficiaries have passed away or can’t be found, the contingent will inherit that particular part of your estate.

It’s vital to be clear about how specific benefits shall be handled if your primary beneficiaries can’t be found or reject their inheritance.

3 Benefits of Clarifying Your Beneficiaries in a Will

In addition to the obvious, there are some major benefits of naming your beneficiaries in a will.

Here are 3 reasons to consider:

#1. Minimal Inheritance Tax

Writing a will could mean that inheritance tax (IHT) is drastically reduced.³

What’s more, a properly drafted trust in your will may enable a selected individual to manage the inheritance you choose to leave to a disabled or vulnerable person.

It can also ensure that the intended beneficiary doesn’t lose out on their means-tested benefits.

#2. Choose Your Executors

By having a will, you get to select your executors. If you pass away before you have written a will, your closest relatives will need to apply for Letters of Administration.⁴

Remember that the executors⁵ chosen on your behalf may not be in line with your wishes.

#3. Leave Specific Instructions

A will allows you to clarify precisely who will get what.

From jewelry to cash, everything will land up in the hands of the appropriate beneficiaries.

Here are 2 ways you can leave your instructions behind:

Draw Up a Legal Document

It's often best to avoid writing your own informal will and, instead, seek professional assistance.

Without the proper estate lawyer, disastrous mistakes can be made, and you could end up with an invalid will or the wrong beneficiaries benefitting from your life’s work.

Create a Homemade Will

These are considered unregulated and don’t come with inheritance protection that a solicitor will ensure.

In order to ensure your homemade will is valid and legally binding, you'll have to meet the rules set out in Section 9 of the Wills Act 1837.⁶

Essentially, your will must:

• Be in writing.
• Signed by you (the testator) in the presence of two individuals.
• Signed by the two witnesses in front of you.

By seeking the right legal advice, you’ll get professional Indemnity Insurance⁷ and regulated documents that the Solicitors Regulation Authority⁸ approves.

By using a professional solicitor, you can avoid your will going through a probate process where it's legally contested.

Who’ll Be Considered Your Beneficiaries if You Have No Will?

If you have no will, your beneficiaries will be determined by intestacy rules.⁹

These rules govern how a deceased person's property (their estate) is divided.

Intestacy rules limit inheritance to married or civil partners and certain close relatives.

The rules can get very complicated and different scenarios will produce different results.

A few points to bear in mind are:

• In order to qualify for the benefit of the deceased, a spouse, partner or civil partner must have survived the deceased by at least 28 days.
• As a result of intestacy rules, a partner who isn't married or in a civil partnership with the deceased cannot inherit automatically.
• Intestacy rules do not allow stepchildren to inherit though legally adopted children are able to.

If you're unsure whether you are a beneficiary or you'd like further clarification of the intestate rules, get in touch with an estate lawyer who'll be able to walk you through the red tape.

Common Questions

In Conclusion

Your beneficiaries may not be your legal family, so it's important to clearly stipulate this.

As long as you put together a legal document with your solicitor, you can rest assured that your chosen beneficiaries will get precisely what you want them to when you pass away.

Now that you know who can be considered a beneficiary, you can make sure your loved ones receive your treasures and have happy memories of your life.