What is the beneficiary?

Definition and Examples of the Beneficiary

How to Identify the Beneficiary

Alternatives for Beneficiaries

Definition and Examples of the Beneficiary

The beneficiary is the person or institution receiving the payment, such as goods or services. Payment can be in any form, including cash, check, money order, or electronic funds transfer. Beneficiaries are commonly encountered in banking transactions. In the case of a check, the beneficiary is the person or institution for whom the check is written. In online payments, beneficiary (or payee) information is provided when setting up automatic transfers. Social Security may assign a representative payee to receive and manage funds on behalf of the beneficiary. The representative payee must use the funds in the best interest of the beneficiary.

How to Identify the Beneficiary

Beneficiaries are usually encountered in banking transactions. In the case of a check, the beneficiary is the person or institution for whom the check is written. In online payments, beneficiary (or payee) information is provided when setting up automatic transfers.

Paper Checks

When using checks, the beneficiary’s name is written on the line that says “Pay to the order of.” This person (or company, or nonprofit organization, or any other entity) is the only one authorized to negotiate the check. They can deposit it, cash it, or possibly sign it over to someone else. For example, on your paycheck (or any other check you receive), you should see your name written on the check, as you are the beneficiary. For instance, if you write a check to pay rent, the beneficiary is the landlord, so you should write the landlord’s name (or the company name) on the check.

Online Bill Payments

If you’re setting up bill payments through your online checking account, the beneficiary is the company you want to pay (your service provider, for example). Providing beneficiary information tells your bank who receives the money and where the check or electronic payment is being sent.

Note

You may need to provide additional details, such as your address or account number, so that the service provider can credit the payment to your account.

Beneficiary Endorsement

When someone uses a check or money order as a payment method, the beneficiary usually must endorse the check by signing or stamping the back of the check. The signature gives the bank authorization to collect funds on behalf of the beneficiary, and you can also provide instructions when signing. On certain items (like checks and money orders), there is a section for “Beneficiary Endorsement,” which indicates where to sign.

If there are multiple beneficiaries listed on the check, any one of them may be able to sign it, or they may all have to do so. The rules depend on state law and the wording used on the check.

After endorsing the check, the beneficiary presents the check to a bank or credit union for deposit. Financial institutions (both the receiving bank and the paying bank, provided they are different) handle the rest of the process in the background, transferring funds from the payer to the beneficiary.

Alternatives for Beneficiaries

In addition to being the primary person paid, a beneficiary can also be another party representing the intended recipient. For example, social security benefits and supplemental income benefits may be paid to a representative payee instead of the beneficiary (the person entitled to receive the benefits) when Social Security believes that the beneficiary is unable to manage the funds on their own. In those cases, another person can help the beneficiary manage their money.

The representative payee is similar to the standard beneficiary. This person can negotiate the check, but they must manage the funds for the actual beneficiary’s benefit. As a result, the funds must be spent on (or for) things that help the beneficiary. It is illegal for the representative payee to exploit those funds for themselves.

Must

The representative beneficiary should work to improve the lives of the beneficiaries and act in their best interest. If the representative beneficiary exploits their position, the Social Security Administration should be notified immediately.

Source: https://www.thebalancemoney.com/payee-definition-and-examples-315334