In the broadest legal terms, beneficiaries are natural persons or other legal entities who receive money or other benefits at the hand of a benefactor. For instance, the beneficiary of a life insurance policy is the person who receives payment when the insured dies. In trust law, the beneficiaries of a trust are the entities who have equitable ownership of the trust’s assets, even though the legal title is held by the trustee. In probate or estate law, the individuals who benefit from a will may be known as devisees or legatees, depending upon local customs.
A beneficiary may have restrictions placed upon their ability to obtain the benefits. The restrictions can never compel beneficiaries to perform illegal actions in order to become vested beneficiaries. Sometimes a beneficiary will have to meet specific circumstances before they can collect. There are almost no restrictions the person who creates the will or trust can have associated with the ability to obtain the benefits by a beneficiary.
In some circumstances, such as a retirement account, only minimal restrictions can be placed on the beneficiaries’ ability to collect the benefits. In the case of a retirement account, the only acceptable restriction on the benefits is the death of the primary beneficiaries.
Depending on the circumstances, the benefits obtained by a beneficiary can also be known as a inheritance.
There are several common categories of beneficiaries, such as primary beneficiaries, third party beneficiaries, and contingent beneficiaries.