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The Beneficiary's Role in an Estate Plan
Grant Pederson • September 13, 2023
The term "beneficiary" comes up frequently during the process of estate planning because the efforts of estate planning are focused on transferring the decedent's assets to the beneficiary. A beneficiary is anyone who gains an advantage or profits from something. In the context of a will, or a trust, or administration proceedings, the beneficiary is someone who is eligible to receive distributions from a will or a trust, or otherwise from the decedent's estate; however, the beneficiary can also be the person who is named in a life insurance policy, a retirement plan, or other contract who is intended to receive the distribution specified in the policy.
Usually any person or entity can be named as a beneficiary to a will, or a trust, or a life insurance policy. Also, the one distributing those funds (the benefactor) has the right to place various stipulations on how those funds are to be disbursed. For example, the benefactor can require that the beneficiary be married, or completes college, or reaches a certain age before receiving the funds. There can also be tax consequences for the beneficiary. To illustrate, while the principal on most life insurance policies is not taxed, the accrued interest may be subject to taxes.
In most cases the benefactor will designate beneficiaries who are to receive the benefactor's assets after they pass away. However, if a beneficiary is not alive or if they don't qualify under the restrictions set forth, the assets will normally pass to what are called contingent beneficiaries. There are some types of accounts that don't allow restrictions beyond death of the primary beneficiaries; however, a trust in particular can allow for a variety of restrictions providing they are not illegal or made for an illegal purpose.
At Pederson Law Offices, our Thousand Oaks estate planning attorneys can explain how the different estate planning tools are used to achieve a variety of goals. Whether you wish to bequeath your assets through a will, or if you have a child who is irresponsible with money and you're afraid that a windfall would be a disaster, there are ways to structure your estate plan so that your concerns are adequately addressed. We understand how no two clients' situations are identical and we are therefore here to provide you with a personalized and tailored estate plan that meets your goals and expectations, whatever they may be.
If you have any questions or are interested in creating an estate plan of your own, we encourage you to contact us today at (805) 372-1507.
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