What is a Beneficiary?

What a beneficiary is

A beneficiary is a person or organisation named in a will to receive something from the estate. They might receive a specific item, a fixed sum of money, a share of what remains, or the whole estate. The term also covers people who inherit when someone dies without a will, because the intestacy rules determine who is entitled to the estate.

Types of beneficiaries

Beneficiaries can be described in different ways in a will:

• specific-gift beneficiaries — people or organisations receiving a particular item or sum, such as a ring or $5,000;
• residuary beneficiaries — people who share whatever is left of the estate after debts, expenses and specific gifts are dealt with;
• contingent or backup beneficiaries — people who receive a gift only if the first beneficiary cannot;
• charities or organisations — which need to be identified by their correct full legal name; and
• beneficiaries who are also executors — common and generally fine, as long as the will is followed faithfully.

What beneficiaries receive

Beneficiaries only receive what is left after the estate’s debts and expenses are paid. Funeral costs, unpaid taxes, loans, mortgages and other valid debts come first. If an estate owes more than it owns, there may be little or nothing left to distribute, even though people were named in the will.

How beneficiaries are paid

The executor collects the estate’s assets, pays its debts, and then distributes what remains according to the will. For most estates this happens only after probate is granted. The process usually takes many months, so a beneficiary should not expect an immediate payout.

Beneficiaries generally do not need to do anything at the start. The executor (or the executor’s lawyer) will contact them in due course, and may ask for identification, bank details or proof of identity for a charity or organisation.

What beneficiaries can ask for

Beneficiaries are entitled to be kept reasonably informed about the estate and to receive what the will gives them. They can ask the executor for information about the estate and its administration. However, an executor is not a beneficiary’s lawyer, and information may be limited while an estate is still being sorted out. A beneficiary who has serious concerns about how an estate is being handled may need their own legal advice.

Gifts that may be affected

A gift to a person who witnessed the will — or to their spouse, partner or civil union partner — may be affected under New Zealand law. This is one reason the signing rules matter: a beneficiary who is asked to witness a will could unintentionally lose their gift.

Gifts to charities also need care. The recipient should be identified by its correct full legal name so there is no doubt about which organisation is intended.

Being left out of a will

Being named as a beneficiary is not a guarantee that no one can challenge the estate. A spouse, partner, child or other eligible person who is left out — or left less than they might expect — may be able to bring a claim under the Family Protection Act 1955. If you are making a will and intend to exclude or reduce provision for someone who could claim, get legal advice before signing.

Updating beneficiaries

Beneficiaries should be reviewed whenever your life changes — a marriage, separation, a new child, a death, a move, or a falling out. A new will made correctly replaces an earlier one, which is the cleanest way to change who receives what.

The bottom line

A beneficiary is simply someone who stands to receive something from your estate — a person, a group of people, or an organisation. Naming beneficiaries clearly, keeping them up to date, and understanding that debts come first are the keys to making sure your estate ends up with the people and causes you intended. Our guide on what a will is and choosing an executor cover the rest of the picture.