Revocable Beneficiary

A revocable beneficiary is a person, trust, charity, or estate designated to receive assets from a life insurance policy, trust, or other payable-on-death account, but whose right to those assets can be changed or revoked by the policyholder or grantor at any time. Most life insurance policies and revocable trusts use revocable beneficiaries because they preserve flexibility.

Key points

• A revocable beneficiary has no guaranteed right to payment until the owner dies (or the trust becomes irrevocable).
• The owner can change beneficiaries, alter payout terms, or terminate the policy without the beneficiary’s consent.
• Primary beneficiaries receive payouts first; contingent beneficiaries receive payouts only if the primary beneficiary predeceases the owner or is otherwise ineligible.
• The opposite is an irrevocable beneficiary, who must consent to removal or change.

How revocable beneficiaries work

• Policy or trust owner designates one or more beneficiaries and can specify percentages, payout timing, and contingencies.
• On the owner’s death, the named beneficiary receives the proceeds according to the contract or trust terms.
• Revocable trusts function similarly: the grantor can change the beneficiary designation while the trust is revocable.

Naming multiple beneficiaries

• Primary beneficiaries: first in line to receive proceeds.
• Contingent (secondary) beneficiaries: receive proceeds only if primary beneficiaries cannot.
• Owners can allocate shares (e.g., 50/50) and name contingent beneficiaries to avoid intestacy or estate delays.

Revocable vs. irrevocable beneficiaries

• Revocable beneficiary: changeable by the owner without beneficiary consent.
• Irrevocable beneficiary: has a vested right to the asset; the owner usually cannot remove or change the beneficiary without that person’s written consent.
• Irrevocable designations are sometimes required by lenders, court orders, or settlement agreements and are used when a beneficiary needs protection from the owner’s unilateral changes.

Practical considerations and common pitfalls

• Beneficiary designations typically override instructions in a will; keeping beneficiary forms current is essential.
• Major life events (marriage, divorce, birth, death, business changes) are common triggers to review and update beneficiaries.
• Naming an estate as beneficiary can subject proceeds to probate and estate taxes; direct beneficiary designations often avoid probate.
• Naming minors directly can create problems—consider a trust or custodial arrangement.
• Inconsistent or unclear beneficiary designations can lead to disputes and delays.

Steps to name or change a beneficiary

1. Review the current policy, trust, or account beneficiary form.
2. Decide primary and contingent beneficiaries and specify exact shares.
3. Complete the insurer’s or trustee’s required designation/change forms and keep copies.
4. Notify beneficiaries of the designation and where documents are kept.
5. Review beneficiary designations after major life events and at regular intervals.

When to involve professionals

• Consult an estate planning attorney or tax professional when:
• Coordinating beneficiary designations with wills and trusts.
• Dealing with complex family or business arrangements.
• Considering irrevocable designations that limit future flexibility.

Revocable beneficiaries provide flexibility and control, but they require periodic review and careful coordination with overall estate and tax planning to ensure your wishes are carried out efficiently.