A beneficiary is a person or entity that receives benefits from specific assets such as trusts, estates, insurance policies, pensions, or investments. The benefits typically come in the form of profits or an inheritance. Beneficiaries are nominated or named in the legal documents that create these contracts, trust funds, or insurance policies. There are primary beneficiaries who are the first in line to receive the benefits, and contingent beneficiaries who step in if the primary beneficiaries are unable to claim or if they deny the benefits.
1. Can a beneficiary be a non-family member?
Yes, a beneficiary does not have to be a family member. You can name friends, charities, institutions, and even pets as beneficiaries in certain financial documents or policies.
2. What happens if a beneficiary rejects the inheritance?
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If a beneficiary rejects the inheritance, it is known as disclaiming. When a beneficiary disclaims an inheritance, it typically goes to the contingent beneficiary, or is distributed among the other beneficiaries. This is subject to the terms of the will, trust, or policy.
3. Can a deceased person remain a beneficiary?
No, a deceased person can’t be a beneficiary. If a beneficiary predeceases the owner or grantor of the asset, the benefits generally go to the contingent beneficiary or are distributed among the remaining beneficiaries.
4. Can a beneficiary be changed?
Yes, in most cases, the person who owns or initially sets up the asset or policy can change the beneficiaries at any time. However, in certain cases like irrevocable trusts or certain insurance policies, changes may not be allowed.
5. What is a primary beneficiary and a contingent beneficiary?
A primary beneficiary is the first person or entity named to receive the benefits of an asset or policy. A contingent beneficiary is the second in line and only receives the benefits if the primary beneficiary can’t claim or denies the benefits. You can have multiple primary and contingent beneficiaries.