The sole beneficiary is the entity designated to receive all of the assets associated with something. You can designate any person or organization as your sole beneficiary. Beneficiary laws vary from state to state, and the application of these laws also depends on the request of the person giving the assets and the person or organization receiving the assets. Everything from retirement accounts to insurance policies to estates can have a sole beneficiary.
Who Can Be a Beneficiary?
Even when a will exists, a disgruntled family member can initiate a lawsuit challenging the estate. Who you can name as a beneficiary depends on the asset in question. Generally, you can name a living person, your estate, a trust or an organization as your sole beneficiary. If you do not designate a sole beneficiary, every entity listed on your will or insurance policy will divide the assets equally. It is important to review your designated beneficiaries on a regular basis. Getting married, divorced and having children may require you to amend your beneficiary information.
Not Naming a Beneficiary
Not naming a beneficiary can result in serious legal ramifications and cost your loved ones significant amounts of money. Every state has laws regarding assets not specifically bequeathed in a will. When no will exists, the estate has to go through a process that assesses and taxes the property before distributing the property to the rightful owners as deemed by the state. States typically use a progression or line of descendants to distribute assets not covered by a will. In most cases, states will distribute assets to the spouse, dependent children, dependent parents, non-dependent children and non-dependent parents in that order. Many variables, however, can affect this order of distribution, including creditors and outside family members claiming rights as heir to the estate.
Types of Beneficiaries
How you name the beneficiaries will dictate their responsibilities and rights under your estate. If you designate a sole beneficiary, he will have the first right to the property associated with the estate. A contingent beneficiary, on the other hand, is a person that receives your assets should the primary beneficiary pass away before they can receive your estate. Multiple beneficiaries divide your property either equally or based on your instructions and directives.
If you name a minor sole beneficiary and the amount of the estate exceeds a certain threshold, you must also establish a conservatorship. You should set up this conservatorship prior to your death and clearly designate the fees you authorize for payment to the conservator or guardian. Additionally, a sole beneficiary sometimes assumes the responsibility of managing a large estate, so you should make sure the person you designate is up to the task.
Brian Bass has written about accountancy-related topics and accounting trends for "Account Today." He works as a senior auditor specializing in manufacturing and financial services companies for one of the Big 5 accounting firms. Bass hold a master's degree in accounting from the University of Utah.