Defining beneficiaries

On Behalf of | Nov 29, 2022 | Estate Planning

Any Pennsylvania resident taking part in estate planning may soon become familiar with the term beneficiary. A beneficiary commonly refers to someone who receives assets or gains benefits, as would be the case with probating a will or accessing a trust. Beneficiaries could also be those named as recipients on various accounts.

Legal beneficiaries

A beneficiary can be any person the planner chooses. Actually, beneficiaries can also be entities such as charities. In any case, the primary beneficiary would be the individual(s) first in line to receive the assets. Secondary beneficiaries, also known as contingent beneficiaries, would receive payments if the primary beneficiary passed away before them.

More than one person or entity can be named as a primary beneficiary. If there are four primary beneficiaries, a planner could divide the assets by 25% equally among them or opt for another percentage.

Notes about beneficiaries

As part of estate planning in Pennsylvania, a planner could take out a life insurance policy or name a spouse or someone else as the beneficiary. A beneficiary could then file a claim on the associated insurance policy.

Some may wish to add beneficiaries to transfer-on-death accounts. A brokerage or savings account that lists a beneficiary will go to that person upon the death of a primary account holder. However, with joint accounts, the joint holder would take ownership. The new owner could also change the beneficiaries.

Anyone can change a beneficiary designation at any time. Therefore, when there are major life changes, reviewing various accounts, documents, and policies could be a good idea to determine if any changes are necessary.

Thoughtful estate planning could prevent beneficiaries from fighting amongst themselves during probate. Taking steps to ensure the will reflects the testator’s true wishes and further documenting the decisions may overcome a disgruntled beneficiary from contesting the will for fraud or other grounds.