What Is the Alternative to Naming a Person as a Beneficiary?

by Karyn Maier
An estate, trust or registered charity can be named as a beneficiary.

An estate, trust or registered charity can be named as a beneficiary.

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A beneficiary is a person or legal entity nominated to inherit property after the person who owns the property has died. Documents in which beneficiaries are named typically include wills and life insurance policies, and beneficiaries usually consist of a surviving spouse, a child or another relative, although a friend may also be chosen. However, a beneficiary does not have to be a person. In fact, there is more than one alternative to naming a person as a beneficiary.

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You can name your estate as your primary beneficiary instead of a person. Naming your estate as beneficiary on a life insurance policy, for example, has the benefit of placing all of your liquid assets in one place, perhaps to fund a credit shelter trust. There are a few potential drawbacks to this strategy. The additional proceeds increase the value of your estate, which might trigger higher state and federal tax liabilities, as well as higher legal fees associated with probating the estate. If your estate has debt, then the additional funds from the insurance payout may be subject to the claims of creditors.


You can name a trust as a beneficiary, but in order for the trust to receive any funds, it must be created before your death. A living trust, also known as an inter vivos trust, is created while you are alive and is not subject to probate. In contrast, a testamentary trust, which becomes part of your will, does go through probate. Because of these differences, it is usually preferable to name the former type of trust as beneficiary instead of the latter. Naming a trust as beneficiary instead of a person is often done to leave property to someone who is legally incompetent to handle financial responsibility.


A charity can be named as beneficiary to inherit the contents of your estate, the proceeds of a life insurance policy, or both. When a charity is the beneficiary of a life insurance policy, the transaction remains confidential and cannot be contested. If you stop paying premiums on the policy, the charity is at liberty to keep the policy in force by picking up the cost of premiums until your death.


It is not necessary to name the same beneficiary in your will as you do in your life insurance policy or other contracts. However, if you live in a community state, be aware that your spouse may have a legal claim to a portion of the property no matter who or what entity is named beneficiary. Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington and Wisconsin are all community states.