beneficiary
A person who receives money or other benefits from a will, insurance policy, or financial account.
Example
“He named his daughter as the beneficiary of his life insurance policy.”
Memory Tip
BENE-ficiary — bene means good in Latin. The beneficiary receives the good stuff.
Why It Matters
Understanding who your beneficiaries are is crucial because they will receive your assets when you pass away or when certain events occur. Without proper beneficiary designations, your money may go through probate court, which is slow and expensive, or may not go to the people you intended.
Common Misconception
Many people assume that naming someone in their will automatically makes them a beneficiary of all assets. However, beneficiary designations on specific accounts like life insurance and retirement accounts override your will, so you need to update these designations separately.
In Practice
If you have a life insurance policy with a $500,000 death benefit and name your spouse as the beneficiary, your spouse will receive the full $500,000 directly when you die. However, if you never updated the beneficiary designation after a divorce and your ex-spouse is still listed, they could legally claim the entire amount rather than your current family.
Etymology
From Latin 'beneficium' meaning 'benefit, favor' — the one who receives the favor.
Common Misspellings
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