Beneficiary — In Plain Words

What the word means, house by house

The official houses do not all word the definition the same way, so this page gives each house’s wording separately.

The OCC (HelpWithMyBank.gov glossary). “Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract.” This is the broadest wording found. It lists a will, a trust, an insurance policy, a retirement plan, and an annuity as places the word is used.

The IRS (retirement accounts and IRAs). “A beneficiary is generally any person or entity the account owner chooses to receive the benefits of a retirement account or an IRA after they die. The owner must designate the beneficiary under procedures established by the plan.” The IRS adds: “Some retirement plans require specific beneficiaries under the terms of the plan (such as a spouse or child).”

The CFPB (revocable living trusts). The CFPB does not give a one-line definition of the word on the page read. On its page about revocable living trusts, it lists three roles under a trust, and the third is: “The people who receive money or property from the revocable living trust. They are called beneficiaries.” It also says: “The people who receive money or benefits from the revocable living trust after the person dies are called residuary beneficiaries.”

Investor.gov / the SEC. The Investor.gov glossary’s B page, read in full, has no entry for “Beneficiary.” The entry it does have nearby is “Beneficial Owner,” a different term: “A beneficial owner holds stocks indirectly, for example, through a bank or broker-dealer.” Investor.gov does use the word “beneficiary” on its product pages — its Annuities page and its Variable Life Insurance page — and those uses are quoted in the life insurance section below. But the SEC’s glossary itself does not define “beneficiary.”

1. Life insurance

This section rests on Investor.gov’s Variable Life Insurance page and its Annuities page, and on the OCC glossary line above, which lists an insurance policy as one of the places the word is used.

Investor.gov’s Variable Life Insurance page is about one kind of life insurance, called variable life insurance. It says: “Variable life insurance is a contract between you and an insurance company and is a form of life insurance. Like other life insurance, it provides a death benefit to your family or other beneficiaries that may be significantly larger than the amount of premiums you pay.”

The same page explains the payment this way: “Variable life insurance pays a specified amount of money to your family or other beneficiaries when you die. This is called the death benefit.”

The same page also states a limit in its own words: if you do not keep enough cash value in the policy to pay the policy’s fees and expenses, the policy may lapse — “That means it will terminate without value and your beneficiary will not receive any death benefit.”

Investor.gov’s Annuities page uses the word for an annuity contract, which is also a contract with an insurance company: “Death benefits. If you die before you start receiving payments, the person you name as your beneficiary receives at least the current value of the annuity, perhaps more.”

2. Retirement accounts

This section rests on the IRS. The IRS page is called “Retirement topics - Beneficiary.”

The IRS definition, again, is: “A beneficiary is generally any person or entity the account owner chooses to receive the benefits of a retirement account or an IRA after they die. The owner must designate the beneficiary under procedures established by the plan. Some retirement plans require specific beneficiaries under the terms of the plan (such as a spouse or child).”

The IRS’s companion page, “Retirement topics - Death,” states the general payment point this way: “When a participant in a retirement plan dies, benefits the participant would have been entitled to are usually paid to the participant’s designated beneficiary in a form provided by the terms of the plan (lump-sum distribution or an annuity).”

The IRS “Retirement topics - Beneficiary” page also gives these two narrower terms, in its own Definitions part:

• Designated beneficiary: “Any individual designated as the beneficiary of an IRA or retirement plan.”
• Eligible designated beneficiary: the IRS lists a spouse or minor child of the deceased account holder; a disabled or chronically ill individual; and an individual who is not more than 10 years younger than the IRA owner or plan participant.

The IRS page is mostly about the required minimum distribution rules, called RMD rules for short, that apply to beneficiaries after the account owner dies, and about how distributions to a beneficiary are taxed. This page does not restate those distribution timelines or tax rules. Read the IRS page itself, in the Sources below, for the IRS’s full wording on them.

3. Bank payable-on-death (POD) accounts

This section rests on the FDIC. The FDIC is the agency that insures deposits at FDIC-insured banks.

The FDIC’s consumer quiz page, “How Deposit Insurance Smart Are You?,” describes the arrangement in its own question: “You want to open a ‘payable-on-death’ account naming your two children as the beneficiaries, and you don’t have any other trust deposits at the bank already.”

The FDIC’s answer on that same page states who can count for its insurance rules: “To be eligible, a beneficiary must be a living person, a charity, or a nonprofit organization (the latter two must be valid under IRS rules).” That sentence is about FDIC insurance eligibility. It is printed here as the FDIC prints it, and for that purpose only.

The FDIC’s Health Savings Accounts page, in its deposit-insurance guide, uses the same idea for a savings-type account. It says the FDIC looks for language “identifying one or more eligible beneficiaries to receive the HSA deposit funds when the owner dies,” and it gives, as an example at the same bank, a person who “has named those same children as POD beneficiaries on a savings account.”

The OCC glossary read for this page has no separate entry for “payable on death.” The POD wording on this page comes from the FDIC only.

4. Estate / wills

This section rests on the OCC glossary and on the CFPB’s revocable living trust page. No other anchor house read for this page covers wills directly.

The OCC glossary’s definition, quoted in full above, names a will first: a beneficiary is a person entitled to receive the benefits or proceeds of “a will, trust, insurance policy, retirement plan, annuity, or other contract.” The glossary gives no separate, longer definition for a beneficiary under a will. That is all the anchors support for wills on this page, and this section does not add more.

For trusts, the CFPB says people use trusts “to keep control of their money and property and to designate who receives money and property once they die.” It says one reason to set up a revocable living trust is to avoid the probate process after death, and it explains that word in its own sentence: “Probate is a public process, and it can be expensive and lengthy.”

The CFPB’s trust wording, again, is: the people who receive money or property from the revocable living trust are called beneficiaries, and “the people who receive money or benefits from the revocable living trust after the person dies are called residuary beneficiaries.” The CFPB also notes that a person who makes the trust could be the only beneficiary while they are alive, or could name co-beneficiaries — for example, themselves and their spouse — who receive some money or property from the trust before they die.

Primary and contingent beneficiaries — not defined in the anchors read

Readers may see the words “primary beneficiary” and “contingent beneficiary” on forms and on other websites. None of the official pages read in full for this page defines either term. The IRS page uses different terms instead — “designated beneficiary” and “eligible designated beneficiary,” defined in the retirement section above. The CFPB page uses “co-beneficiaries” and “residuary beneficiaries” for trusts. Because no anchor read defines “primary” or “contingent,” this page does not define them.

A note about USA.gov

USA.gov was checked for this page. USA.gov has no page that defines “beneficiary” in the sense used on this page — the person named to receive money or property after an owner dies. A search of USA.gov for wills and beneficiary designations found no covering page.

The USA.gov pages that do use the word use it in a different sense. Its page “Report the death of a Social Security or Medicare beneficiary” uses “beneficiary” for a person who was receiving Social Security or Medicare: “You must report a beneficiary’s death to the Social Security Administration (SSA).” Its “Government death benefits” page is about benefits a family member may be entitled to after a death. Neither page defines the estate, insurance, or account meaning of the word. That gap is stated here so a reader does not go looking on USA.gov for a definition it does not give.

What this page does not cover

This page does not say that a beneficiary designation controls over a will, and it does not rank a will, a trust, an insurance policy, a retirement plan, and an account against each other. No anchor read states that ranking, so it is held out. See the estate / wills section above.

This page does not define “primary beneficiary” or “contingent beneficiary.” No anchor read defines them. See the section above.

This page gives no forms and no step-by-step instructions for naming, changing, or claiming as a beneficiary. The only general statement the anchors support is the IRS’s: the owner must designate the beneficiary under procedures established by the plan. For any account or policy, the plan, the bank, or the insurance company that holds it is the source for its own procedures.

This page prints no dollar figures. The FDIC pages read state deposit insurance coverage amounts, and the IRS pages state tax and distribution rules, including timelines for beneficiaries. This page does not restate amounts or timelines. Read the source pages in the Sources below for those.

This page does not decide who should be named, and it gives no advice about any person’s own accounts, policies, will, or trust.

Words to know

Beneficiary: In the OCC glossary’s words, a person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract.

Beneficiary (retirement accounts): In the IRS’s words, generally any person or entity the account owner chooses to receive the benefits of a retirement account or an IRA after they die.

Designated beneficiary: In the IRS’s words, any individual designated as the beneficiary of an IRA or retirement plan.

Eligible designated beneficiary: In the IRS’s list, a spouse or minor child of the deceased account holder; a disabled or chronically ill individual; or an individual who is not more than 10 years younger than the IRA owner or plan participant.

Death benefit: In Investor.gov’s words on its Variable Life Insurance page, the specified amount of money a variable life insurance policy pays to your family or other beneficiaries when you die.

Payable-on-death (POD) account: The FDIC’s name, on the pages read, for a bank account on which beneficiaries are named — in the FDIC’s example, an account naming the owner’s two children as the beneficiaries.

Residuary beneficiary: In the CFPB’s words, a person who receives money or benefits from a revocable living trust after the person who made the trust dies.

Beneficial owner — a different term: In Investor.gov’s glossary, a beneficial owner holds stocks indirectly, for example, through a bank or broker-dealer. It is not the same term as beneficiary, and the Investor.gov glossary has no “Beneficiary” entry.

General information only — not legal advice. This page was not written by a lawyer.

Only the plan, bank, insurance company, or court that holds your own papers can speak to your own case. This page decides nothing.