What Is an Intended Beneficiary?

An intended beneficiary is a type of third party arrangement in which one party agrees to extend certain considerations to a second party, with the understanding that the second party will ultimately provide some form of benefits to that third or intended party. The idea is that the intended beneficiary is provided for in some manner that is acceptable to the first party, who is often referred to as the promisee. Those benefits are extended through the second party, known as the promisor, and are provided to the direct or intended beneficiary in accordance with any covenants that govern the relationship between the two other parties. An arrangement of this type may be used in a number of instances, including providing for the care of minor children until they are old enough to manage their own finances.

The concept of an intended beneficiary can function in a number of ways. The key is that someone arranges through an intermediary for the beneficiary to receive some sort of support of benefit, either on a one-time basis or over an extended period of time. The benefit may be monetary in scope, or in the form of some sort of good or service. For example, an individual may arrange with a provider to deliver a basket of fruit to a third party every month for a full calendar year. The promisee tenders the payment for the fruit and the delivery to the promisor, who in turn provides the benefit of a basket of fruit once a month to the intended beneficiary.

An arrangement of this type can also be established as a means of caring for minor children in the event that the parents should pass away suddenly. Arrangements can be made for the children to be cared for by a family member or trusted friend, with regular disbursements made from a trust or other type of financial arrangement to help pay for food, clothing, shelter and educational expenses for the children until they reach adulthood. The promisor functions as an administrator who ensures the funds are being used to benefit the children. Often, this will continue until the children are of legal age to assume control of the parent’s estate and manage the assets responsibly.

With an intended beneficiary arrangement, it is possible to make sure loved ones are provided for, even if the promisee is no longer able to see to that care personally. This method is commonly used in a number of cultures, and helps to provide additional security in a number of situations. Creating this type of arrangement normally requires the establishment of a legal agreement between the promisor and promisee that includes provisions and instructions on how the intended beneficiary will receive support and other considerations that are in compliance with the wishes of the promisee.