Beneficiary: Trust & Estate

By James Parker
/
April 4, 2022

What Is a Beneficiary?

A beneficiary is defined as an individual who benefits from something. These benefits can have a number of forms and functions. 

Beneficiaries are found in many different industries but most often they are found in the finance, insurance, trusts, and estates industries. These industries have a number of financial or legal policies that allow for an individual to receive benefits they themselves may not have established. 

In insurance, beneficiaries are those who the insurance pays out to. For health insurance that is anyone who is covered by the policy and may include spouses and children. Life insurance pays out after the insured’s death to the named beneficiaries of the policy. 

In finance a beneficiary may receive payments from an established account such as a trust fund. These funds may pay out specific amounts in accordance with a previously signed contract. An additional factor for trust funds is that they may have stipulations or rules that require the beneficiary to perform certain tasks or use the money in certain ways. 

Lastly, a beneficiary can also be someone who receives a one-time disbursement or gift. A simple example of this type of one-time disbursement is when a will is settled.

Beneficiaries are not permanently established. They can be added or removed whenever the individual in control of the plan or someone with their authority chooses as long as the plan allows it. The insurance payer can add a spouse or remove a child who has their own insurance. Trust fund beneficiaries may lose their funds if they fail to maintain the terms of the disbursement. A life insurance beneficiary may forfeit their payout if the death was fraudulent or was not covered by the policy.

Key Takeaways

  • A beneficiary is anyone who receives a benefit from something.
  • Common examples of beneficiaries include trust fund recipients, individuals bequeathed assets by a will, and children of insured parents.
  • Some people who may believe they should have been beneficiaries of a relative’s estate may be able to file suit in order to be included in the disbursement of the estate and assets.
  • If you want to add or remove beneficiaries from your last will and testament, an experienced Trusts & Estates attorney may be able to improve the outcome of your case by utilizing experience and expert knowledge.

Beneficiaries, Trusts, and Estates

After someone has passed away, determining the beneficiaries is a very important process. If someone is not named as a beneficiary, but believes that they should have been, then they may attempt to challenge the will.

The first thing to determine before attempting this challenge is for the individual to consider whether or not they have the standing to sue. In order to challenge a will, it must be more likely than not that the would-be beneficiary is an “interested person”

An interested person could have been a named beneficiary in a previous version of the will. This would entitle them to attempt to argue why they should have been included in the current version of the will being used by the executor. If successful, they would become a beneficiary of the will once more. 

Another way to claim interested person status is if the individual would have been a beneficiary if the testator had died without a will at all. This argument posits that since state law entitles them to some beneficiary status by default, they should be able to leverage this to be a beneficiary once more. 

Testators do still have broad leeway to determine what they leave to their beneficiaries. If a would-be beneficiary is explicitly excluded or is left very little, then the probate court is less likely to take the would-be beneficiary’s side.

Beneficiaries who were either denied some inheritance by a change in the will, or were naturally inclined to receive some portion of the inheritance can span a wide variety of entities. Far from being only immediate family and friends, the full list of potential interested persons also includes:

  • Churches and faith communities
  • Distant relatives
  • Friends
  • Grandchildren
  • Non-Profits
  • Pets
  • Universities

Any person or entity could become a beneficiary as long as they can demonstrate to the probate court that it is more likely than not that they should have received some amount of the deceased’s estate. The exact amount owed by the deceased’s estate will be determined by the probate court separately.

Bottom Line

If you believe that you have been unfairly or unlawfully excluded from the final will of a loved one, you will need an experienced trusts & estates attorney. A trusts & estates attorney can help you achieve the best possible outcome for your case.

By utilizing knowledge of estate law, a trusts & estates attorney can argue eloquently and concisely why you should have been included in the last will and testament of the deceased. Additionally, a trust & estates attorney can help to ensure that you receive the possessions promised to you by the deceased.

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