A more thorough explanation:

A beneficiary is a person or entity that receives benefits from a transaction through a contract, will, or trust.

In a will or trust, a beneficiary is someone who is named to receive property or assets from the testator or grantor. This can include real estate, personal property, financial assets, and more. Beneficiaries can be individuals, corporations, or charities. However, the same person cannot be the sole trustee and sole beneficiary.

The definite-beneficiary rule of express trust requires that the identity of the beneficiary be ascertainable. But there are exceptions created by the Uniform Trust Code. Trusts for general but non-charitable purposes and trusts for a specific non-charitable purpose may be enforced without ascertainable beneficiaries. The rule against perpetuities is applied to these trusts. Thus, they cannot be enforced beyond 21 years. A charitable trust without a beneficiary or specific purpose will fail unless the court selects a beneficiary or purpose consistent with the grantor’s intent.

Beneficiaries of a will have rights over their share of the distributed inheritance. Before distribution, they have a right to receive estate information from the executor. If they believe that the executor is not transparent or has mismanaged the estate, beneficiaries can request to review the estates or even sue the executor. Trust beneficiaries also have the right to request a special accounting from trustees or take legal actions in probate court if they think the trustees misbehaved in their fiduciary role.

In contract law, a third-party beneficiary is a person who is not a party to the contract but can receive benefits from the performance of the contract. The privity of the contract is between the contracting parties - promisor and promisee. A promisor is a party that makes promises to benefit the third-party beneficiary. A promisee is a party who pays consideration to obtain the promisor’s promise.

An intended beneficiary is an identified third-party that contracting parties intending to give them benefits via their promised performances, like doing or not doing something or paying money. The beneficiary may be named in a contract to have contractual rights, but it is not necessary for them to be identifiable at the time the contract is formed. Meanwhile, even if the promise is not made to them directly, they may still enforce the contract.

A donee is a person the promisee intends to benefit without asking for any payback. Once the donee knows the contract, the right is vested. If any contracting party breaches the promise, the creditor can only sue the promisor unless the donee has detrimental reliance on it.

A creditor is a person whom a debt is owed by the promisee and paid by the promisor. The creation of it is to extinguish debt. Once the creditor has detrimental reliance on it, the right is vested. If any contracting party breaches the promise, the creditor can sue both the promisor and promisee. The contracting parties can defend the creditor by asserting claims they have against the other contracting party.

If a beneficiary does not belong to the above categories, they are an incidental beneficiary. An incidental beneficiary is a person whom contracting parties did not intend to benefit when they contracted but happened to get benefits. Since an incidental beneficiary is not named in the contract and not intentionally included, they have no rights under the contract and cannot sue for breach.

The contractual rights cannot be enforced by the third-party beneficiary until the rights are vested. Vesting occurs when the beneficiary has knowledge of the promise and manifests assent to a promise in the manner requested by the contract or contracting parties, or sues to enforce the promise, or detrimentally relies on the promise, or express contract term vesting rights. Prior to vesting, contracting parties can rescind or modify the beneficiary’s contractual rights without the beneficiary's consent or knowledge. Once rights vest, the contract cannot be changed or modified unless the third-party consents.

Even though there is no contract privity among the third-party beneficiary and contracting parties, the beneficiary may still have the right to sue them to enforce the contract or seek damages for breach. Generally, the beneficiary can only sue the promisor to enforce the performance or duty created by the promise in the contract. The promisor can defend as they defend against the promisee. The beneficiary cannot sue the promisee unless they detrimentally rely on the promise.

Example 1: John creates a trust and names his daughter, Sarah, as the beneficiary. When John passes away, Sarah receives the assets in the trust.

Example 2: A mother purchases medical insurance for her son from an insurance company. The mother is the promisee, the son is the third-party beneficiary, and the insurance company is the promisor. If the insurance company fails to provide the promised coverage, the son can sue the insurance company for breach of contract.

Example 3: A construction company enters into a contract with a homeowner to build a new house. The homeowner's friend, who is not a party to the contract, will receive the old house as a gift once the new house is built. The friend is an intended third-party beneficiary and can enforce the contract if the construction company fails to build the new house.

These examples illustrate how beneficiaries can receive benefits from a transaction through a contract, will, or trust. They also show how third-party beneficiaries can enforce contracts if they are intended beneficiaries and their rights are vested.