What are beneficiaries and how do they inherit property?
The goal of a Last Will & Testament is to ensure that your property and assets are distributed to the people of your choosing. These people who you would like to receive, or “inherit”, your assets are called “beneficiaries”.
Wills distributes assets in two ways: First, specific bequests, which are usually made at the beginning of the Will. Specific bequests are gifts (bequests) of cash, a specific items, or a categories of items to a named person or organization. For example, a wedding ring, $1,000, an antique, a car, or all of your remaining tangible personal property. For example, a mother may want to make sure that her jewelry goes to her daughter, or grandparents may decide that they would like to give $1,000 to each of their five grandchildren. Specific bequests, which are optional, may include cash (or other intangible personal property), tangible personal property, or real property.
After any specific bequests, the will distributes the “residuary estate”, or all the property and assets that remain after specific bequests The residuary estate is distributed to your beneficiaries through provisions that outline how the remaining assets should be divided up. If no specific bequests are made, the beneficiaries of the residuary estate will receive the entire estate.
What are the common types of beneficiaries in a Will?
The people who will get your property, also called beneficiaries, are often family members, close friends and charities. Below are the most common types of beneficiaries named in Last Wills and Testaments.
- Spouse: Your spouse is most likely the first beneficiary designated in a last will. In most states, it’s actually against the law to try to disinherit your spouse upon your death. You may wish to leave everything to your spouse, but you should also consider how well your spouse can manage finances, or provide for other dependents.
- Children: While it’s common to leave your assets to your spouse with the expectation that they’ll provide for your children, you may wish to create special provisions for your children, in case something happens to your spouse. This is especially true if you or your spouse have children from another marriage.
- Other Family Members: In some cases it may be desirable to provide for siblings and elderly parents. In other cases, nieces and nephews may be appropriate choices.
- Friends: Friends, particularly close friends, may be more important to you than family members, and can be appropriate beneficiary choices.
- Charities: Charitable organizations provide important services, and many depend on gifts from estates as an important funding source. Leaving a bequest to one or more appropriate charities can help provide important services and benefits to your community and/or promote values that are important to you, and certainly are appropriate beneficiary choices. In addition, tax laws encourage charitable gifting, and as a result, significant income tax and estate tax savings can be achieved through charitable gifting.
- Contingent Beneficiaries: You should provide for the possibility that your first choice as a beneficiary will not survive you. You can name a contingent beneficiary to receive your assets in the event your first choice is unable to accept your bequest. You should provide for enough layers of contingent beneficiaries to reasonably assure yourself that beneficiaries will be available to receive the assets of your estate.
How do I choose and elect beneficiaries?
Most individuals select those closest to them as the beneficiaries of their estates. Usually this means that spouses and children will be provided for first. If the person who is making the Will (the "Will writer") has no spouse or children, attention is usually turned to other relatives or friends, and in some cases, charities.
A spouse is often the primary beneficiary, and in many cases receives the entire estate.
After considering the needs of a spouse, children are the next most likely beneficiaries. Often the entire estate is distributed to the spouse with an expectation that the spouse will provide for the children. However, this may not be appropriate if the spouse is not the parent of the Will writer's children. If the Will writer has minor children, special planning through the use of a minor children's trust may be needed to preserve and manage the share of the estate for the children.
Although many individuals include only a spouse and/or children as beneficiaries, in other circumstances, beneficiaries may include other family members, friends, or charities.
What kinds of assets are not distributed to my beneficiaries in a will?
Your Last Will does not control the distribution of your life insurance, retirement plans, and trusts—basically, the types of assets that are paid in accordance with beneficiary designation forms, unless your designations of the life insurance proceeds are specifically designed to cause the proceeds to flow through your last will.
Who will inherit my estate if I don’t have a Will?
If you don’t have a will, your property will go through probate to determine. In this case, state law controls who will receive your property. Generally, this means that your property will go to your spouse first and then any heirs.
How do I make sure someone does not inherit anything?
“Disinheriting”, or excluding someone from your will, is usually accomplished through a statement in the will that makes it clear that the exclusion of an individual was intentional.
Since a family member would typically inherit some part of your estate through probate, excluding an individual without making it clear the omission was intentional may raise questions as to whether you as the Will writer simply made a mistake. Further, such excluded persons may attempt to challenge the Will under the assumption that you simply made an error in excluding them from the Will.
Excluding spouses may be more tricky since many states "protect" spouses with laws that permit a spouse to receive a portion of the estate even though the Will does not provide for the spouse. Prenup or postnuptial agreements between you and your spouse may permit you to exclude your spouse from the Will, but you should consult with a lawyer regarding the legal rights of your spouse to receive property from your estate in your state.
Please note: This page offers general legal information, not but not legal advice tailored for your specific legal situation. Rocket Lawyer Incorporated isn't a law firm or a substitute for one. For further information on this topic, you can Ask a Legal Pro.
