Planning for the future is an important aspect of life, especially given the uncertain nature of life. A crucial aspect of planning is putting your affairs in order, and a key element of this process is understanding the meaning and nature of beneficiaries. This article will guide you through what beneficiaries are, why they matter and the important considerations that should be taken into account when choosing or serving as one.
What is a beneficiary?
A beneficiary is a named individual or organisation that is entitled to receive assets from an individual that has usually been recently deceased. This could include money, property or any other remaining assets. Beneficiaries are mainly appointed through wills, trusts, insurance policies or other financial arrangements. As beneficiaries receive property it is important if you are planning to leave assets to particular people that you understand the consequences and meaning of this. Moreover, if you have been named as a beneficiary it is important you appreciate the process to ensure you receive what is entitled to you.
There are different types of beneficiaries which have varying roles and rights. As such it is important you are aware of this before creating or carrying out any asset distribution. These will be explained below. And, there is generally no limit on the amount of beneficiaries that can be appointed.
The different types of beneficiaries
Primary beneficiary
The primary beneficiary is the named individual or organisation that is first in line to legally receive assets from the will, trust, or insurance policies when someone has passed away. These beneficiaries will hold the main claim to what has been outlined by the deceased.
It is common for people to name close family members, such as spouses and children as primary beneficiaries to ensure that their loved ones are provided for after passing.
Contingent beneficiary
If the primary beneficiary predeceases the will or trust creator, or unwilling to inherit, the assets will not transfer. Instead, the assets will fall to the continent beneficiary who acquires a legal right to them. Having a contingent beneficiary is essential to ensure that assets are distributed according to the deceased wishes, even where unforeseen circumstances arise. Without this back-up plan, assets will be distributed according to the rules of intestacy, which if you have clear wishes for where your assets will go, it is likely that this will not be carried out. Moreover, if there are no living relatives, the assets will be passed back to the crown.
Types of accounts that needs beneficiaries
Some accounts will allow you to name both primary and contingent beneficiaries in the event that you pass. This means that if the specific account is not specified in the deceased will, the beneficiary will generally directly receive the assets and bypass the probate process.
Some accounts that allow named beneficiaries include:
Annuities: These allow you convert savings or a pension into a guaranteed income on retirement. If a joint-life annuity was chosen and a beneficiary was named, the annuity payments continue, potentially at a reduced rate. A guaranteed period allows the continued payment to a beneficiary for a set time.
Life Insurance: On death of the policy holder, a life insurance beneficiary will receive the financial proceeds of the policy
Bank Account: Beneficiaries can typically be named on most types of bank accounts however this is not a legal requirement. This individual will be known as a “payable on death” beneficiary.
The importance of naming beneficiaries
Clearly naming beneficiaries on your accounts and documents such as wills, ensures that assets will be distributed according to your individual wants and wishes. Without designated beneficiaries, processes such as probate can become longer and more complex, and thus incur more costs.
Benefits of naming beneficiaries
Avoids Confusion: Probate can be a long and lengthy process and especially for the families of the deceased, who may be emotional, pre-planning beneficiaries and ensuring your affairs are in order will enable the process to be streamlined and free from any disagreements of who is entitled to what.
Saves Money: Probate can incur significant costs, especially where a lot of evidence is required or there are assets worth a lot. Early naming of beneficiaries can avoid these costs.
Saves Time: Accounts that already have designated beneficiaries are usually able to quickly receive the assets that they are entitled to.
As a beneficiary of a will, what are my rights?
Beneficiaries have specific legal rights. These include:
Right to Information: Beneficiaries usually have a right to be informed of the existence of the will, trust or their specific entitlement. Beneficiaries are also entitled to know the progress of the estate or trust administration.
Right to see Inventory and Estate Accounts: Usually there is a right to receive a set of estate accounts from the executor or administrator. These accounts detail the assets, income, liabilities and expenditures of the estate.
Right to Inspect Estate Records: Beneficiaries can inspect the financial statements, receipts and other documentation the executor used to manage the estate
Right to Challenge Accounting: If there is a discrepancy or issue with the accounting by the executor this can be challenged.
Right to Fair Treatment: Fair and impartial treatment should be respected throughout. This includes timely distribution of their share of the estate. If necessary information or their is a suspected mishandling of the estate, beneficiaries can issue proceedings. The court can make varying orders to ensure compliance.
In the event of delays, inconsistencies or mishandling of the estate, it may be necessary to seek legal advice.
How Goughs can help
Whether you need help understanding your rights, interpreting legal documents, communicating with executors, or pursuing a claim, Goughs are here to support you. With professional advice tailored to every stage of the inheritance process, our team is dedicated to protecting your interests and ensuring you receive the guidance you need.
Contact Goughs today to discuss your situation with one of our experienced inheritance specialists.
