In finance, what is a beneficiary?

A beneficiary is defined as a person who profits from a trust or insurance policy. This term is commonly used in the context of trusts, wills, and insurance agreements, where the beneficiary is the individual or entity entitled to receive the benefits or proceeds of the financial arrangement upon certain conditions being met, such as the death of the policyholder or the fulfillment of trust requirements.

In the case of an insurance policy, for example, the beneficiary receives the death benefit upon the policyholder's passing. In trusts, beneficiaries are designated to benefit from the assets managed within the trust according to the terms set forth by the trustor. This identification of a beneficiary is crucial as it ensures that the intended parties receive the financial benefits that have been planned for them, thus providing security and peace of mind regarding the distribution of assets.