How to Choose a Will Beneficiary: What You Need to Know

A last will and testament is a powerful tool to help protect your family. From choosing a guardian for your kids to passing along your cherished baseball card collection, a will makes your wishes known. 

The beneficiary of a will is the person who’ll inherit your assets when you die—that can include cash, property and other belongings. 

Deciding who to choose can be a sensitive question, so we’re here to help you get started.

What Is the Beneficiary of a Will?

A will beneficiary is someone who’ll inherit from your estate when you die. You can name (or exclude) whomever you want and divide your estate however works for you. 

Close relatives like a spouse and kids are often the top choices for beneficiaries. You don’t need to stop at close relatives, though. You can name friends, a business partner or even charitable organizations. 

(Despite what some movies would tell you, though, pets can’t inherit property in the U.S., so your fur babies can’t directly be your beneficiaries. Here's what you should know about pet trusts and taking care of your pets after you're gone.)

Many people want to know: Can an executor of a will be a beneficiary? The short answer is yes. It’s actually pretty common for the executor to also be the will beneficiary. 

If you have questions about writing your will, it’s a good idea to speak to an estate planning attorney, especially if you’d like to set up complex instructions. If you don’t have the time or money to meet with a lawyer right now, however, Fabric’s simple online will can help you document your wishes for free, in minutes. Fabric will also provide steps on how to make the document legally binding.

Can’t the Courts Just Figure It Out When I’m Gone?

If you die without a will, any accounts without a beneficiary will go through your state’s intestate laws (“intestate” means dying without a will in place). 

States follow their own hierarchy to find your next of kin. Generally, your estate goes to a spouse first, then your kids, your parents or siblings and so on. One of the advantages of writing a will is that you don’t have to follow your state’s defined order.

For example: If you financially help any friends or extended family, they may be in a tough place if you don’t have a will. If intestate laws recognize someone else first, that legal heir has no obligation to give anything to your other friends or family. The probate process, which is the public legal process of distributing an estate, also tends to drag out longer when there’s no will.

If you have kids and die without a will, the court would have to get involved to appoint guardians and financial custodians or trustees for your kids. Being proactive with your plans gives you the chance to state your wishes. 

Choosing a Child as a Will Beneficiary

Lots of people don’t even think about writing a will until they have kids. But minors can’t legally inherit until they’re of age (18 or 21, depending on your state and the amount of the inheritance), though, so you need to take some extra measures to set up their inheritance.

The best way to do this, according to Kirk Kinder, financial planner and owner of Picket Fence Financial, is to set up a trust fund or Uniform Transfers to Minors Act (UTMA) account. The benefit of doing this in advance is you can name the person you’d like to act as trustee, as well as set up any other requirements. 

State laws generally let minors inherit an UTMA account at age 18 or 21. With a trust, you may have more control to stagger or extend the age of inheritance. Having minors inherit at age 25, for example, can prevent a sudden influx of funds from affecting a college financial aid package. 

If you have dependents who will need lifelong care (for example, a special needs child), make sure your will specifies instructions for your wishes.

By a similar token, it can also be problematic to appoint your minor child as your life insurance beneficiary.

6 Steps to Choosing a Beneficiary of a Will

When choosing a beneficiary for your will, there are several principles to keep in mind:

1. Get Your Will in Place! 

Writing a will can sound complicated (and who likes confronting their own mortality?) but Kinder says putting it off is a serious mistake. 

“All you’re going to do is set it up so your assets will be distributed according to state law,” he says, which can lead to your estate going to people you didn’t choose. 

This happened to Kinder’s great-uncle. Rather than listing beneficiaries on accounts that made up half his estate, he left instructions to follow the will—which he never actually wrote before he died. The result was that the money was split between four nieces, one of whom was married to a spouse the uncle couldn’t stand. Setting up a will is easier than you might think, so there’s no reason to delay putting your wishes on paper. 

2. Don’t Assume Your Will Overrules Other Instructions

If you’ve named a beneficiary on your life insurance policy, or chosen a beneficiary to inherit your savings through a POD bank account, those beneficiaries get the money even if your will says something else. 

The beneficiary designation holds higher legal weight than either a will or state intestate laws, so these accounts stay out of the probate process altogether.

3. Update All Your Financial Accounts

Life is full of changes. Leaving an ex on your will, or forgetting to add a child or another loved one, can mean that your legal documents no longer reflect your wishes. Update your will and other beneficiary accounts whenever your financial priorities change.

4. Consider Contingencies

“Contingents are if your primary beneficiaries aren’t there. It never really comes into play unless all your primary beneficiaries are gone, but I’ve seen that a lot,” Kinder says. It’s worth thinking about who’s closest to you. At what point would you rather see your estate go to a charity or a friend than a relative way out in your extended family tree?

5. Use ‘Per Capita’ and ‘Per Stirpes’

Life is unpredictable. Certain instructions help cover unforeseen situations. “Per capita” instructions can split inheritance evenly between members of the same generation, like children or grandchildren (so you’re covered if you forget to update names on the will after a new baby is born). 

“Per stirpes” says that if your beneficiary dies before they can inherit, their portion goes down the line to their children instead. This might be a way for you to ensure your children’s families get an inheritance. 

6. Pay the Executor

Your will also allows you to name an executor, or the person responsible for handling the logistics of distributing your estate. State law or your will can name the fee the executor can collect for their work and expenses. The wishes you state in your will generally count the most, so you can name the terms you think are fair.

Run questions by a legal professional. For example: If you leave money to your best friend but you both pass away in the same accident, would your best friend’s portion revert back to your estate, or go into theirs? State laws vary on how to handle this and other situations. 

Choosing beneficiaries for your will is a highly individual decision. What works for one person or family might look completely different from another. Choosing a beneficiary for your will may even be an opportunity to reflect on who you consider closest to you, and who depends on you the most. 

However you decide to divide your estate, reflecting your priorities in your will is an important part of the legacy you leave for your loved ones.

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