A will provides instructions on how your assets are passed on to beneficiaries. You can name individuals or entities as beneficiaries. What matters is that your final wishes are honored in your estate plan.
Here are three of the most common types of beneficiaries.
Primary beneficiaries
Primary beneficiaries are the people or organizations that first inherit your assets. Usually, these are family members or close friends. However, primary beneficiaries can also be organizations like charities.
When drafting your will, it is essential to highlight your primary beneficiaries. This helps to avoid estate disputes during probate.
Contingent beneficiaries
In estate planning, it’s important to prepare for things going wrong. Your primary beneficiaries may not be in a position to accept your assets. This is where contingent beneficiaries come in.
For example, your primary beneficiary may have passed away before you. Often, this occurs between spouses. One spouse may have been set to inherit the family home but passed away. In such instances, children can be named as contingent beneficiaries so that assets still stay within the family.
Charitable beneficiaries
Charitable donations can also be a part of your estate plan, and you can name charities, religious institutions and other non-profits as beneficiaries in your will. Not only will this make charitable giving a part of your legacy, but there can be tax advantages for your estate.
Estate planning is an important process but the law in this area can be tricky. As you plan for the future, it may help to seek some legal guidance.