A beneficiary is an individual or entity to whom a deceased benefactor -- known as a decedent -- bequeaths real and personal property, cash or other assets. The will defines the decedent's intended beneficiaries and the inheritance they are to receive. Named beneficiaries have certain rights to the estate and their inheritable assets. However, beneficiaries are not necessarily entitled to anything beyond what the decedent bequeathed to them, and have limited rights even in this regard.
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Designation and Inheritance
A beneficiary is entitled to know that a will names her as a beneficiary, along with the full inheritance the decedent assigned to her. The executor is obliged to notify the beneficiary that she is named within the will, and to provide her with information regarding what she is to receive. However, the beneficiary is not entitled to receive, appraise or view her inheritance until probate completes and ownership of the property transfers to her.
The executor has an obligation to the beneficiaries to exercise reasonable diligence when administering the estate. While state probate laws define what constitutes “reasonable,” in general, the executor should transfer ownership of all beneficiaries’ inheritance within a year after the decedent’s passing. If the executor requires additional time, he must provide the beneficiaries with a reason for the delay. Otherwise, the beneficiaries may petition the adjudicating court to appoint a new executor, who can assume responsibility for dividing the estate’s assets accordingly.
A common misconception holds that beneficiaries have a right to information about the estate’s assets, interests, accounts and other general information. However, beneficiaries have no right to any information beyond the inheritance they are to receive as defined by the will. While a beneficiary can obtain a copy of the will during probate, the executor is under no obligation to furnish a copy or provide any information about the estate, including other beneficiaries’ inheritance.
Abatement is the process of liquidating an estate’s assets to cover its outstanding liabilities. An estate faces abatement when it holds more debt than it owns in disposable assets, and beneficiaries can lose some or all of their inheritance in the process. In this situation, a beneficiary’s rights come second to the rights of any creditors, as the estate’s liability to its creditors supersedes anything else. The estate cannot bequeath property or assets it does not own, so it must settle its outstanding claims before the court can determine what it lefts to distribute amongst the beneficiaries. Although most states first liquidate any assets not specifically assigned to a beneficiary, assigned property and cash are not exempt from abatement. In the event that part of the beneficiaries’ inheritance covers the estate’s liabilities, the court divides the remaining assets by percentage, with each beneficiary receiving a share that is equal to the inheritance the decedent defined. If the estate breaks even after covering its liabilities, or takes a loss, the beneficiaries are entitled to nothing and receive no inheritance.
References & Resources
- "Wills, Trusts and Estate Administration"; Dennis R. Hower; 2007
- "Probate Disputes and Remedies"; Dawn Goodman, et al.; 2008
- "Wills and Probate"; Emma Gaudern, et al.; 2008