Here’s what to consider.
Designating a beneficiary is a choice you must make and revisit throughout your career. This decision requires some careful thought. If you die while working, the beneficiaries you choose may receive certain benefits. If you want to make a beneficiary change, make sure you’re aware of who can be named as your beneficiary.
Types of Beneficiaries
There are two types of beneficiaries you can name: primary and contingent. A primary beneficiary receives your death benefit. You have the option to name more than one primary beneficiary. If you chose to do this, each primary would share the benefit equally.
If you listed your spouse and child as primary beneficiaries, your family would receive:
- Spouse: 50 percent of benefit
- Child: 50 percent of benefit
But you can also state specific percentages of how you’d want the benefit paid out to primary beneficiaries. Just keep in mind that the percentages must add up to 100 percent. (This applies to contingent beneficiaries also.)
A contingent beneficiary only receives a benefit if all your primaries die before you. You can have primary and contingent beneficiaries, but a contingent may only get a benefit if there are no primaries to choose from. If you outlive your primary and contingent beneficiaries and haven’t named anyone new, your benefit will go to your estate.
Special Beneficiary Designations
Your beneficiary doesn’t have to be a person – you could also name your estate, trust, or an organization to receive your benefit.
- Estate. The executor of your estate will receive your benefit to be distributed according to your will. You can make your estate a primary or contingent beneficiary, but if you name it your primary, you can’t name a contingent.
- Trust. If you name your trust as a beneficiary, keep in mind that the trust is the beneficiary, not the individual you established the trust for. If you cancel the trust or it expires, it won’t be a valid beneficiary anymore. (You may also want to speak with your attorney if you’re thinking about making your trust a beneficiary.)
- Organizations. You can name any charitable, civic, religious, educational or health-related entity as a beneficiary. Please provide the organization’s full name and address if you name them a beneficiary.
You can read more about beneficiaries in our publication, Life Changes: Why Should I Designate a Beneficiary?