Your mentor once wisely said, “Don’t put all your eggs in one basket.” If you really want to protect yourself and your assets, do the same with your savings.

Many people choose to split their estate between several beneficiaries. The word “beneficiary” is often misused, and a lot of people don’t understand its meaning or difference from others related to the estate.

Everything you need to know about beneficiaries and what is a beneficiary can be found below.

What Is a Beneficiary?

A beneficiary is a person, estate, or organization that is named in a legal document, such as a will, insurance policy, or retirement account, to receive money or other benefits upon the death of the person named in the document. 

Who Can Be a Beneficiary?

In order to qualify as a beneficiary, an individual must be designated in a will or trust or named as such in a life insurance policy. A beneficiary can be a spouse, child, other family members, friend, or organization. The proceeds of the estate or insurance policy are distributed to the named beneficiaries after the death of the policyholder or estate owner.

What Are the Benefits of Being a Beneficiary?

The benefits of being a beneficiary can include receiving money, property, or other assets from the estate of a deceased person, or receiving payments from an insurance policy or retirement account. A real estate attorney can help you create a complete list of the benefits that a beneficiary has.

How to Choose a Beneficiary?

When you are choosing a beneficiary, you should consider three things: who you want to receive your assets; when they will receive those assets, and how those assets will be distributed to them. 

You can name anyone as your beneficiary, including your spouse, children, parents, or other relatives. You can also name your favorite charity as your beneficiary.

Who Can Change a Beneficiary?

The person who leaves the benefit is called the grantor or benefactor. The grantor can often name more than one beneficiary and can change the beneficiaries at any time. Only the grantor can change the beneficiaries.

What Happens If You Don’t Choose a Beneficiary?

If you don’t choose a beneficiary, the default beneficiary will be your spouse. If you are not married, the default beneficiary will be your children. If you don’t have any children, the default beneficiary will be your parents.

If you don’t have any living parents, the default beneficiary will be your siblings. If you don’t have any living siblings, the default beneficiary will be your estate.

If you are unsure about what is a beneficiary or who you would like to name as your beneficiary, you can always speak with a financial advisor who can help you make the best decision for your unique circumstances.

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