You’ve Likely Heard the Word and Even Used It in the Past, but Who Are Actually Considered Beneficiaries? Fear Not. We’ll Help You Fully Understand the Word and Aid in Equipping You in Your Journey Towards Retirement.
Understanding the exact definition of a beneficiary is vital in your journey towards leaving a lasting legacy when you die.
Death isn’t easy for those left behind. Death 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.
We’ll help you discover:
- Who’ll be considered the beneficiaries of your estate?
- How you can make your decisions clear for those you leave behind.
- Who’ll be regarded as your beneficiaries if you have no will?
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 might be!
Defining the Term Beneficiary
In simple terms, the word beneficiary is defined by a person, people, or entity you name in your will and life insurance policies that will be entitled to receive your death benefits and estate. This can be one person, two or more people, the trustee of a trust you’ve set up, or a charity of your choice.
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 residual beneficiary, who’ll receive a portion of your estate. The second is known as a non-residual beneficiary. These are the beneficiary who’ll 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, social security numbers, and define your relationship with the beneficiary.
2 Types of Beneficiaries
To further explain beneficiaries, let’s break things down into 2 different types:
The primary beneficiaries are the first people named in your will to receive your assets.
When selecting your beneficiaries, it will 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 whom 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.
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 Who’ll Be 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:
Minimal Inheritance Tax
Writing a will could mean that Inheritance Tax (IHT) is drastically reduced. 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, and can also ensure that the intended beneficiary doesn’t lose out on their means-tested benefits.
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 Administration1. Remember that the executors2 chosen on your behalf may not be in line with your wishes.
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
We strongly suggest that you avoid writing your own informal will and instead seek professional assistance. Without the proper legal aid, 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 consumer protection that a solicitor will ensure. By seeking the right legal advice, you’ll get professional Indemnity Insurance3 and regulated documents that the Solicitors Regulation Authority4 approves.
By using a professional solicitor, you can avoid your will from going through a probate process where your will is legally contested.
Who’ll Be Considered Your Beneficiaries if You Have No Will?
If you die without a will, the court will instantly assume that you’ve wished for the estate to go to the family. Family is defined as your spouse, an interdependent adult partner, and your children.
While your life may be simple, that’s not the case for everything. What’s more, your beneficiaries may not be your legal family. Many of us can attest to the fact that we’ll find loved ones in unexpected places.
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. Whether it’s an old friend, a spouse, or a child, your loved ones can receive your treasures and have happy memories of your life.