A beneficiary is any person who gains an advantage and/or profits from something. In the financial world, a beneficiary typically refers to someone eligible to receive distributions from a trust, will, or life insurance policy. Beneficiaries are either named specifically in these documents or have met the stipulations that make them eligible for whatever distribution is specified.

As related to a will, a beneficiary is someone who gets your stuff when you die. That’s the bare bones definition. Now, here’s the longer explanation: a beneficiary is a person or organization (nonprofit or charity) you name in certain legal documents—like a will or a life insurance policy—to receive all or some of your assets (money and other stuff you own) when you pass away. You can list more than one beneficiary, and you don’t have to choose a relative.

Friends and relatives other than spouses, children, and grandchildren aren’t usually given special consideration in estate planning matters. There may be people in your life you consider family but who may not be recognized legally as relatives. Each state has rules of succession laws which help determine who gets assets if there is no will or if the named beneficiaries aren’t sufficiently clear, but these rules don’t usually provide for individuals beyond the deceased’s immediate, legally recognized family.

Your life insurance beneficiary can be a family member, a business partner, a charitable organization, a legal entity like a trust, or your estate. Who you list as your life insurance beneficiary is your choice, though some states have laws that regulate who you can and can’t name.

A beneficiary is anyone you name in your Estate Plan who will ultimately benefit from your estate. The benefits could be in the form of money or anything else you pass down. Beneficiaries are an important part of your plan, as they give purpose and guidance for what you’re leaving behind. Beneficiaries are named in several places of your Estate Plan, including:  

• Life insurance policies
• Last Will and Testament
• Retirement plans like a 401(k), 403(b), IRA or similar plans
• Social Security disability (in some cases)
• Savings and checking accounts