The word "beneficiary" covers a lot of different types of inheritances. It is important to know what the different types of beneficiaries are.
People often think of a beneficiary as someone who inherited a lot of money. However, as the term covers receiving assets from a wide variety of legal instruments, many people get confused.
A person can be a beneficiary of several different things, including a will, a trust or an insurance policy. Each legal instrument has its own rules that must be followed.
Recently, the Chicago Tribune published a list of things to consider about the different types of beneficiaries in an article titled "5 key considerations when naming beneficiaries."
The list includes:
- Beneficiaries of a will have to wait for the probate process to run before they can receive their inheritances while trust beneficiaries do not.
- Life insurance and retirement policy beneficiaries receive the assets directly without having to go through the probate process or a trustee.
- You should not ordinarily name a minor as the beneficiary of a life insurance policy. It is better to name a trust the beneficiary of the policy and the minor the beneficiary of that trust.
- There can be tax consequences of naming different people as beneficiaries of your retirement policy.
- Be careful when naming multiple people to be beneficiaries of a single instrument and make sure they all get the appropriate share.
If you have any questions, be sure to contact an experienced estate planning attorney who can guide you through the maze of requirements.
Reference: Chicago Tribune (April 5, 2015) "5 key considerations when naming beneficiaries."