Beneficiary
Candlefocus EditorIn most cases, a beneficiary is someone who the deceased named in their will, trust, or other estate-planning documents. In the absence of these documents, assets are typically distributed according to the laws of the state in which the deceased lived. These assets, which can include financial accounts, investments, insurance policies, and real estate, are all considered the deceased person’s estate, and the beneficiary is the one who stands to inherit them.
In some cases, a beneficiary isn’t just an individual. It can also refer to a trust, charity, or even a company. Whoever is named in the documentation as the beneficiary, either exclusively or among multiple beneficiaries, is eligible to receive assets from the deceased’s estate in an order of priority.
Generally, when someone inherits assets, such as a retirement account, they have several options for the distribution of funds, depending on whether they are an eligible designated beneficiary or a non-eligible designated beneficiary under current regulations.
For example, an eligible designated beneficiary, who is the surviving spouse of the deceased, can treat the inherited account as their own and roll it over into their own IRA. If they choose not to roll it over, then they can take a lump-sum distribution and pay the regular income tax on the distribution. Other rules may apply to other beneficiaries, such as non-spouse heirs.
It’s important to remember that you can change your beneficiaries at any time, even if you’re not making any other changes to your account. To do so, you’ll need to complete and return the relevant paperwork to the account administrator or trustee. The documents required to make a change in beneficiaries may vary by account type, so it’s important to follow the instructions for the specific account you want to update.
In conclusion, a beneficiary is an individual or organization (such as a trust, charity, or company) that is eligible to receive assets from another person. They can be named in a will, trust, or other estate-planning document, or they may receive assets according to the laws of the deceased’s state. The options and rules regarding the distribution of assets may vary depending on who the beneficiary is. Changing beneficiary designation can be done at any time, but it requires completing and returning the relevant paperwork.