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A beneficiary is a person or entity designated to receive assets or benefits from a will, trust, life insurance policy, or retirement account.
In Depth
When you set up certain financial accounts or legal documents, you name a beneficiary. This ensures that your assets are distributed according to your wishes after you pass away. It's crucial to keep your beneficiaries updated, especially after major life events like marriage, divorce, or the birth of a child. If no beneficiary is named, or if they've passed away, the assets may go through a lengthy legal process called probate.
Example
John named his wife, Sarah, as the primary beneficiary on his life insurance policy, so she would receive the payout if he died.