Learn how to reduce your income and estate tax, fast.

Get our tips on big-picture strategy and actionable tactics for startup equity, small businesses, crypto, real estate, and more.


Remainder Beneficiary

What is a Remainder Beneficiary?

A remainder beneficiary is a designated individual who will receive the remaining portion of an estate after all debts, taxes, and other paid-out expenses. The owner can name the remainder beneficiaries in the will or any other legal document designating how the estate will distribute upon the passing of its owner.

When establishing a will or other estate-planning document, the testator or person creating the will must designate the beneficiary and any primary beneficiaries. A primary beneficiary receives a specified portion of the estate before distributing any remaining assets to a remainder beneficiary. This beneficiary will only receive their designated share after paying all other debts, taxes, and expenses.

For example, if a person leaves $10,000 to their spouse and $5,000 to their best friend. Then, the remainder of the estate would go to the remainder beneficiary. The estate will be distributed according to state law if there is no specific designation.

Who is a potential beneficiary?

A remainder beneficiary can be any individual the testator chooses, such as a spouse or child. Alternatively, it can be an entity such as a charity, school, or organization. Depending on what type of estate-planning document you use to establish the remainder beneficiary, the testator can place additional conditions on the distribution of assets.

Regardless of who is the remainder beneficiary, they must receive proper notification and understand their rights and responsibilities as remainder beneficiaries. For example, without adequate notice, a beneficiary may not realize they are entitled to receive assets from an estate until much later.

Is a remainder beneficiary a qualified beneficiary?

A qualified beneficiary can receive distributions from an employer-sponsored retirement plan. This includes employees, their spouses, and their children. A remainder beneficiary is not qualified and therefore is not eligible to receive distributions from the program.

The plan sponsor must designate qualified beneficiaries, and the owner cannot change the designation once it’s done. If the plan sponsor fails to establish a qualified beneficiary, the default rules of the plan will apply. These rules usually state that the employee’s spouse is the default beneficiary.

It’s important to note that just because someone is a remainder beneficiary does not mean they are automatically disqualified from receiving distributions from an employer-sponsored retirement plan. The plan sponsor may choose to distribute assets to the remainder beneficiaries even if they are not designated as such. However, this is at the sponsor’s discretion, and the law doesn’t require it.

Next Steps

Explore our tax planning tools to take the most advantage of your investments. Get started with our calculator. Or access our previous definitions to know more!

About Valur

We built a platform to give everyone access to the tax and wealth-building tools of the ultra-rich like Mark Zuckerberg and Phil Knight. We make it simple and seamless for our customers to take advantage of these hard-to-access tax-advantaged structures so you can build your wealth more efficiently at less than half the cost of competitors. From picking the best strategy to taking care of all the setup and ongoing overhead, we make it easy and have helped create more than $500m in wealth for our customers.