Donee Beneficiary

Think about the stereotypical life insurance arrangement. You buy life insurance and name a beneficiary (like your dog). If you kick the bucket, the insurance company pays the agreed amount to little Barko Baggins.

The arrangement is technically between you and the insurance company. The insurance company owes you the money. Since you'll be dead, you designate a third party to receive the money. That third party represents the donee beneficiary. "Donate" to the "bene"=good, ficiary like "official," or person standing in that place.

In these arrangements, the two key parties are the promisor and the promisee. In the life insurance example, you are the promisee and the life insurance company is the promisor. There are various types of third-party beneficiaries that come into play, with separate categories depending on their legal standing.

A donee beneficiary is receiving the benefit as a gift. You don't owe Barko the money. You just want him to have it.

However, the insurance company does owe something. If they try to welch on the payment after you croak, Barko's lawyer would have standing to sue. Then whiz on their shoes.