Beneficiaries receive assets or financial benefits from benefactors, such as through inheritance or life insurance policies. Wills and trusts designate beneficiaries, including contingent beneficiaries, and municipalities can also be beneficiaries for community projects.
Beneficiaries are individuals or entities that receive assets or some other type of financial benefit from a benefactor. A beneficiary often receives these benefits as part of an inheritance, or as the recipient of a cash payment from a life insurance policy. An entity such as a city or town can be considered a beneficiary if the municipality receives support and assistance to overcome a natural disaster, or if it receives donated funds for a specific construction project, such as a municipal library.
When most people think of a beneficiary, the first thing that comes to mind is someone who receives an inheritance. To ensure that an estate’s assets are divided according to the owner’s wishes after the owner’s death, a legal document known as a will is drawn up. The will addresses different holdings associated with the estate, such as cash on hand, property, life insurance policies, investment instructions such as stocks and bonds, and even furniture and the owner’s personal effects.
As part of the process, the will provides specific instructions about who is supposed to receive what assets currently in the owner’s possession. Once the owner dies, an individual designated as the administrator of the estate will carry out the wishes of the deceased, ensuring that each of his possessions is turned over to the designated individual. A will can designate a single beneficiary or include multiple beneficiaries, depending on the provisions established by the owner.
Wills and insurance policies often include what is known as a contingent beneficiary. This is simply an individual or entity that will benefit from the estate in the event that a primary beneficiary is also deceased. For example, a spouse may be the primary beneficiary in a will, but if he or she is also deceased, the assets of the estate may pass to a child or other relative. Close friends and various non-profit organizations may also be designated as contingent beneficiaries.
An individual can also be the beneficiary of a trust agreement. Trusts allow people to leave their assets in the hands of a trustee, who is responsible for using those resources to care for people or causes that were important to the deceased. For example, a parent may choose to structure the estate so that all assets are sold and the proceeds are placed in a trust. Over time, the funds within the trust may be used to provide the children with an education, a home, or any other purpose specified in the terms of the trust. Parents sometimes choose this approach as a means of ensuring that their children receive adequate care, even once they reach adulthood.
Municipalities may also be designated as beneficiaries. People can choose to leave their property and other property to the community, with the stipulation that the assets are used to benefit the city or town in some way. This may include using the assets to build a library, a children’s community playground, or establishing some sort of ongoing scholarship program for people who are residents of the borough.
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