A beneficiary is a person, people, or entity designated to receive assets (money, property) from another person in the event of that second person’s death. A beneficiary can be set for a trust, will, financial account, life insurance policy, or retirement account (401(k), pension, IRA, etc). It’s a good idea to set a beneficiary for each of your financial accounts and review them occasionally to make sure they are still accurate.
By designating a beneficiary, you are expressing your wishes and giving direct instructions for what you want to happen with these particular assets in the event of your death. There are primary and contingent beneficiaries: primary is your first choice and contingent is your second choice if the primary person(s) is no longer living. A named beneficiary on your accounts and insurance policies takes precedence over instructions in a will. In other words if your named beneficiary on a 401(k) account is different than the general instructions left in a will, the named beneficiary will generally receive those 401(k) assets. A will covers anything left without a named beneficiary.
It is important to keep your named beneficiaries updated as life events (birth, adoption, marriage, divorce, death) occur to ensure your assets are distributed according to your wishes.