Wills, Trusts & Estates

Designation of a Beneficiary
Although legal restrictions may apply, it is broadly possible to convey property outside of
probate, through such tools as a living trust, forms of joint property ownership that
include a right of survivorship, payable on death account, or beneficiary designation on
a financial account or insurance policy. Beneficiary designations are considered
distributions under the law of contracts and cannot be changed by statements or
provisions outside of the contract, such as a clause in a will.
In the United States, without a beneficiary statement, the default provision in the
contract or custodian-agreement (for an IRA) will apply, which may be the estate of the
owner resulting in higher taxes and extra fees. Generally, beneficiary designations are
made for life insurance policies, employee benefits, (including retirement plans and
group life insurance) and Individual Retirement Accounts.
Identity: A specific, identifiable individual or business must be designated as
beneficiary for life insurance policies. Businesses may not be the beneficiary of a
group life insurance policy or a retirement plan.
Contingent beneficiary: If the primary beneficiary predeceases the contract
owner, the contingent beneficiary becomes the designated beneficiary. If a
contingent beneficiary is not named, the default provision in the contract or
custodian-agreement applies.
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