What is a Named Beneficiary?

A named beneficiary is a person identified as the recipient of benefits from a pension plan, insurance policy, trust or other instrument.

How Does a Named Beneficiary Work?

For example, let's say John Doe has a life insurance policy with a $1 million death benefit. He has three children, a wife and a mistress. John makes his mistress, Jane Smith, the beneficiary of his life insurance policy by listing her as such in the policy documents. When John dies a year later, the mistress receives the $1 million because she is the named beneficiary on the policy.

Why Does a Named Beneficiary Matter?

Providing a named beneficiary can speed up the process of asset distribution because the items do not need to go through probate. In some states, spouses must consent in writing if the other spouse wants to name a third party as a beneficiary.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.