A reversionary beneficiary plays a crucial role in estate planning, ensuring assets are distributed effectively. Explore the concept and significance of this unique beneficiary designation.

This type of beneficiary refers to an individual or entity who gains control of assets or property after the current owner’s death or the fulfillment of a specific condition.

Types of Reversionary Beneficiaries

a. Spouse Beneficiary: Generally, the surviving spouse becomes the beneficiary upon the death of the initial beneficiary. This is, by far, the most common type of reversionary beneficiary.

b. Children or Descendant Reversionary Beneficiary: When the initial beneficiary passes away, children or descendants typically inherit the assets.

c. Charitable Organization Beneficiary: The assets or property may revert to a designated charity or organization after the beneficiary’s lifetime.

Determining a Reversionary Beneficiary

a. Will or Testamentary Trust: In estate planning, the testator can designate reversionary beneficiaries through a will or testamentary trust document.

b. Superannuation designation: Designating a reversionary beneficiary ensures the accounts benefits flow to the new recipient after the initial beneficiary dies.

c. Trusts and Other Legal Structures: Establishing a trust allows for the appointment of alternative beneficiaries if the primary beneficiary is unable to fulfill their role.

Reasons for Designating Reversionary Beneficiaries

a. Preservation of Assets: Reversionary designations aid in preserving and protecting assets by ensuring they pass to intended recipients.

b. Avoiding Probate: Reversionary arrangements bypass the probate process, potentially avoiding delays and disputes inherent in court administration.

c. Flexibility and Control: Designating these types of beneficiaries offers flexibility to adapt to changing circumstances, ensuring assets align with one’s wishes.

Revoking or Modifying a Reversionary Beneficiary

To modify or revoke a reversionary beneficiary designation, one may need to update their will, revise trust documents, or update their life insurance policy or superannuation beneficiary designation.

This type of beneficiary designation is a vital component of estate planning, ensuring assets are protected and disbursed correctly upon the initial beneficiary’s passing.