Beneficiary designation

What it means

A beneficiary designation is a contract between the account holder and the institution. On proof of death, the institution pays the named person — no court, no executor, no will involved.

It applies to life insurance, retirement accounts, pensions, annuities, and to bank and investment accounts registered payable-on-death or transfer-on-death.

It overrides the will. A will leaving everything to one child does not change a retirement account naming another.

Why it matters

This is where most of the money usually is, and it is the fastest thing to claim — often weeks rather than months.

It is also a frequent source of an outcome nobody intended, because designations are made once and rarely revisited. An ex-spouse named decades ago is still the beneficiary.

When you are likely to meet it

• When an insurer or plan administrator asks who is named.
• When the will and an account disagree.
• When reviewing a parent's accounts, or your own.

Related terms

• Annuity death benefitWhat an annuity pays when the owner dies — which depends entirely on the contract and its phase.
• BeneficiarySomeone who receives something because a document says so.
• Beneficiary claimThe request a named person makes to an institution to be paid what they were named on. It is not a claim against the estate, and the two are opposites.
• COBRA continuation coverageThe right to keep an employer's health insurance for a period after the event that would otherwise end it — including the death of the employee.
• Contestability periodThe window, usually two years, in which a life insurer may investigate and rescind a policy.
• Contingent beneficiaryThe person who receives an account or policy if the first-named beneficiary has died or cannot take it.
• Deposit insuranceThe federal guarantee on money held in a bank or credit union, which continues for a period after the account holder dies.
• Designated beneficiaryThe person actually named on an account or policy. In the retirement-account rules it is also a narrower term, and an estate does not qualify as one.
• Digital assetAn online account or file that has value or meaning — email, photographs, cloud storage, domains, currency accounts, loyalty balances.
• Disclaimer of inheritanceFormally refusing an inheritance, so that it passes as though you had died first.
• Domestic partnerA legally registered relationship short of marriage. Whether it carries inheritance rights depends entirely on the state.
• ERISAThe federal law governing most employer retirement and benefit plans. It is the reason a plan's own beneficiary form usually beats a will or a state law.
• Federal retirement benefitsThe pension and insurance system for federal civilian employees — FERS or the older CSRS, plus group life cover, each with its own beneficiary record.
• Funding a trustActually moving property into a trust — retitling accounts and deeds into its name. An unfunded trust generally does not control assets that were never transferred into it.
• Governing instrumentWhichever document actually controls an asset — a will, a trust, a beneficiary form, a deed, a partnership agreement.
• Group life insuranceLife insurance provided through an employer, union or association rather than bought individually.
• Inherited IRAA retirement account received from somebody who died, held under rules that differ from an account you opened yourself.
• Intangible personal propertyProperty with value but no physical form — bank accounts, shares, policies, pensions, patents, a debt somebody owes.
• Non-probate assetSomething that passes to a new owner automatically, without a court.
• Operating agreementThe document setting out how a limited liability company is run — including what happens to a member's interest when they die.
• Per capitaA way of dividing an inheritance among the beneficiaries who are actually alive, so a deceased beneficiary's children receive nothing.
• Per stirpesA way of dividing an inheritance so that if a beneficiary has died, their share passes down to their own children rather than to the other beneficiaries.
• Payable on death (POD)A bank-account instruction that pays the balance to a named person on the owner's death.
• Primary beneficiaryThe first person in line on an account or policy, ahead of any contingent beneficiary.
• ProbateThe court process that confirms who has authority to deal with what somebody owned when they died.
• Qualified domestic relations orderA court order dividing a workplace retirement plan between spouses after a divorce, which the plan must be given in order to act.
• Required minimum distributionThe amount that has to be taken out of a retirement account each year once the rules require withdrawals to begin.
• Simultaneous deathThe rule deciding who inherits when two people die together and the order cannot be established.
• Slayer ruleA person who unlawfully kills somebody cannot inherit from them.
• Special needs trustA trust that holds money for a person with a disability without disqualifying them from means-tested benefits.
• StepchildA partner's child you did not adopt. Generally not a descendant for inheritance, however they were raised.
• Survivor annuityA continuing pension payment to a surviving spouse, if that option was chosen when the pension started.
• Survivor benefitA continuing payment to a spouse, child or other dependant after somebody dies — from Social Security, a pension, or an annuity.
• Thrift Savings PlanThe retirement savings plan for federal employees and members of the uniformed services.
• Transfer on death (TOD)A designation that passes an asset directly to a named person when the owner dies, without probate.
• Transfer agentThe company a corporation employs to keep its share register and to move shares from one owner to another.
• UGMA and UTMA accountsCustodial accounts holding money for a child, which the child takes control of outright at an age set by state law.
• WillA written document saying who should receive what, and who should be in charge of seeing that it happens.
• Prenuptial agreementA written agreement signed before a marriage that changes some of the financial and property rules the marriage would otherwise bring with it.
• Right of survivorshipA form of shared ownership where the survivor automatically takes the whole thing.

Sahvelo guidance that uses this

• Beneficiary designations
• Retirement accounts