There are many definitions of what a beneficiary actually is and it is important to know the differences. You will see below all of the different types of beneficiaries and how to handle situations in regards to taxes, life insurance proceeds, annuity contracts, and other legal matters. It is always important to name someone with a vested interest in you or your assets as your Primary Beneficiary. An example of this would be your wife of your husband.
A Contingent Beneficiary will receive awards or proceeds if the Primary Beneficiary is deceased. Some contracts ask for many beneficiaries because life has so many twists and turns, you have to think and prepare yourself and your loved ones in case they become beneficiaries.
There are also Tertiary Beneficiaries that are named in contracts if the Primary and Contingent both have become deceased. If you have any questions about this topic or you need to change your options, please do not hesitate to ask. In most instances, to make a change just requires a simple one page form. Involving trusts and wills, it is a little more complicated but still necessary.
Beneficiary: a person or entity (as a charity or estate) that receives a benefit from something: as
a: the person or entity named or otherwise entitled to receive the principal or income or both from a trust.
Contingent beneficiary: a beneficiary that may receive proceeds from a trust depending on the occurrence of a specified event (as the death of another beneficiary)
Income beneficiary: a beneficiary that according to the provisions of a trust is to receive income but not the principal of the trust NOTE: A trust may provide for income to be paid to someone (as a spouse) for his or her lifetime and then for payment of the principal to another person. A trustee is sometimes allowed to distribute some of the principal of the trust to an income beneficiary when necessary for the support of the beneficiary if support of the beneficiary was the purpose of the trust.
b: the person or entity named by the insured of a life insurance policy to receive the proceeds upon the insured’s death
Contingent beneficiary: a beneficiary named to receive the insurance proceeds if the primary beneficiary has died called also secondary beneficiary
Primary beneficiary: a beneficiary named to receive the insurance proceeds before any other
Secondary beneficiary: contingent beneficiary in this entry
c: a person or entity entitled under a letter of credit to demand payment from the issuer of the letter
d: a person or entity that benefits from a promise, agreement, or contract
Creditor beneficiary; a direct beneficiary whom the party paying for the other party’s performance intends to benefit as payment for a debt or obligation.
Direct beneficiary: a third-party beneficiary to a contract whom the parties to the contract intended to benefit.
Donee beneficiary: a direct beneficiary whom the party paying for the other party’s performance intends to benefit as a gift or donation.
Incidental beneficiary: a third-party beneficiary to a contract whom the parties to the contract did not intend to benefit.
Third-party beneficiary : a person or entity that is not a party to but has rights under a contract made by two other parties.
That concludes our examples and definitions of what a beneficiary is. We are here to help you understand all of the legal speak in plain english so feel free to call or email anytime. It is your contract and you need to understand all that it is.