What Is A Contingent Beneficiary?

What is a contingent beneficiary? Read on to find out

When filling out the application for life insurance, you will be required to name primary and contingent recipients. Assigning recipients can be quite difficult on the off chance that you don’t know precisely what you’re doing. However, try not to stress too much. One question that a lot of people ask is: “What precisely is a contingent beneficiary, and how is it different from  a primary beneficiary?”

A contingent beneficiary gets a beneficiary-named account if the primary beneficiary can’t or will not do as such. They’re “second” recipients who pretty much just have to wait for good measure. In addition to this, they’re next if the resource can’t move to the primary individual who’s named. You should name who should get the assets on the off chance that you put resources into an IRA, a 401(k), or an insurance strategy. Here are a couple of interesting points about what is a contingent beneficiary and how they work.

What is a beneficiary?

A life insurance beneficiary is an individual who will get the payout from an approach if you somehow passed away. The returns from the payout can be utilized to help pay for monetary requirements – those that accompany death, like arranging a funeral and other expenses that may arise due to death, alongside everyday bills like the home loan and kid care. You can name (at least two) individuals as recipients, laying out the level of the arrangement payout for each given individual. Furthermore, you can likewise name a contingent beneficiary, who could get the death benefit if something happened to the primary beneficiary. Consider a contingent beneficiary as your “substitute.” With most life insurance arrangements, you can change your beneficiary whenever you want to.

For a few, assigning two primary recipients — say, a life partner and a parent — may bode well, particularly if both could confront monetary difficulty. For other people, one primary life coverage beneficiary, with a contingent beneficiary named, bodes well. You can have more than one primary beneficiary and more than one contingent beneficiary; you just need to assign which level of your extra security continues and you need to figure out what portion of your assets should be given to every one of your primary recipients. Regardless of the number of primary recipients you have, the total percentage dispensed should rise to 100%. How you partition that 100% is dependent upon you, the policyholder.

What is a contingent beneficiary?

At the point when you purchase a life insurance strategy, you pick one individual, element, or association to get the policy’s death benefit in the event that you pass away. This is your primary life insurance beneficiary. Yet, life insurance beneficiaries can also pass away, or your connections can change, so safety net providers urge you to name at least one contingent beneficiary notwithstanding the primary beneficiaries recorded in your strategy. A contingent beneficiary gets your life insurance payout if your primary beneficiary can’t collect on your approach. Naming a contingent beneficiary saves the payout from getting postponed by a long lawful interaction or being taken by creditors.

All in all, a contingent beneficiary is indicated by an insurance contract holder or retirement account proprietor as the individual or element who gets the proceeds if the primary beneficiary is dead, cannot be found, or rejects the legacy at the time the proceeds are to be paid. A contingent beneficiary is qualified for insurance proceeds or retirement resources only if certain foreordained conditions are met at the hour of the insured individual’s death, for example, data found in a will. A contingent beneficiary possibly acquires it if the primary beneficiary doesn’t. The record will be delivered to your subsequent beneficiary if your first beneficiary can’t be discovered, does not accept the proceeds, isn’t lawfully ready to acknowledge it, or passes away before you do.

How do contingent beneficiaries work?

You may name your life partner as the primary beneficiary of 100% of a record. Your two grown-up kids may get half each as contingent beneficiaries if your life partner can’t or will not consider. You may likewise name your life partner as the primary beneficiary of half of the record, with your youngsters each named as 25% primary beneficiaries. The fact of the matter is that you can dice it up any way you want to.

You can even name a charity organization as a beneficiary, despite the fact that you’ll need to converse with a tax professional about how to best do that. You can name more than one primary beneficiary and more than one contingent beneficiary — you’re not restricted to one of each. In addition to this, you can set rates for each, referring to which part of the record they ought to get. Your retirement records will return to your probate home in the event that you neglect to name a contingent beneficiary, and your primary beneficiary can’t or will not acknowledge the account.

For a contingent beneficiary of a will, for all intents and purposes, any conditions might be set up; it relies totally upon the individual drafting the will. A contingent beneficiary will get nothing if the primary beneficiary acknowledges a legacy. For instance, let us say Cheryl records her life partner John as the primary beneficiary for her life insurance strategy and their two youngsters as contingent beneficiaries. At the point when Cheryl bites the dust, John gets the insurance payout and the youngsters get nothing. In the event that John dies before Cheryl, their kids each get a large portion of the returns.

Characteristics of contingent beneficiaries

Contingent beneficiaries can be individuals, associations, charities, estates, or trusts. Minor kids or pets don’t qualify on the grounds that they don’t have the legal ability to acknowledge the assets that are allotted to them. In the event that a minor child is recorded as a contingent beneficiary, a legal guardian is delegated to regulate the cash until the minor reaches a lawful age. In spite of the fact that it’s very popular for contingent beneficiaries to be family members, close relatives and friends are frequently recorded too.

Various contingent beneficiaries might be recorded on a life insurance strategy or retirement account. Every beneficiary is assigned a particular percentage of cash, amounting to 100%. A contingent beneficiary gets resources, in a similar way, expressed for the primary beneficiary. For instance, a primary beneficiary getting $1,000 each month for a very long time implies that a contingent beneficiary gets installments similarly.

Contingent beneficiaries should be investigated and updated after significant life changes, like marriage, divorce, birth, or death. For instance, after Steve and Monica separate, he updates his life insurance strategy so his daughter Kayley is the primary beneficiary and his son Robert is the contingent beneficiary. Thus, Steve effectively obstructs Monica from receiving his life insurance proceeds.

Requirements for contingent beneficiaries

The people you name should be legitimately ready to acknowledge the assets and proceeds in case of your death. Issues can arise in the event that you name your minor children as beneficiaries since they can’t accept the resources until they are of legal age. Thus, a legitimate guardian should be named to acknowledge the cash for a minor’s benefit and oversee it until they become legal. This would also apply if your beneficiaries were mentally unstable and incapable to deal with their own undertakings. You can choose a legal guardian ahead of time regardless, yet a court should lawfully delegate somebody on the off chance that you don’t. That can be a costly cycle. In addition to this, the individual named by the court probably won’t be somebody who you’d want to manage and control your resources.

What is a contingent beneficiary versus a primary beneficiary?

Basically, when setting up your life insurance strategy, you will assign a primary beneficiary (ordinarily your spouse or partner), who will get all death benefits in the event that you pass away. (It is impossible to sugarcoat these things in some cases.) Your contingent beneficiary would be your backup — this is the individual who will get those death benefits if your primary beneficiary cannot get them.

If your will assigns a primary or contingent beneficiary, that individual or entity is a beneficiary of your will. The resources given to the beneficiary will in any case have to go through probate, but it will go to the beneficiary as opposed to being part of your general estate and being subject to division among your other beneficiaries. Numerous sorts of resources additionally permit you to assign a beneficiary who will get the resource when you pass away. These incorporate life insurance policies, IRA and 401(k) accounts, bank accounts, securities brokerage accounts, health savings accounts, college savings plans, and trusts. In certain states, a beneficiary may likewise be assigned for motor vehicles and real estate. In the event that a beneficiary is assigned for one of these resources, that resource will not have to go through probate.

The primary beneficiary is the individual or entity who has the first claim to acquire your resources after your death. Regardless of the expression “primary,” you may name more than one such beneficiary and assign how the resources will be split between them. On the other hand, a contingent beneficiary is the second in line to acquire your assets. The only way a contingent beneficiary acquires anything from the account or policy is if the primary beneficiary or beneficiaries have predeceased you or cannot be found.

For instance, in the event that you have two children and name your first child as the primary, or principal beneficiary and your second child as the contingent beneficiary, only your first child would acquire the resources upon your death unless he/she predeceases you or cannot be found. In such a case your second child would acquire the full sum. In the event that you name them both as primary beneficiaries, they would divide the resources as indicated by the rates you have settled on.

Then again, you may decide to name your spouse as the primary beneficiary and your children as contingent beneficiaries. In this case, your kids would inherit only if your life partner predeceases you. On the off chance that you wanted both your spouse and kids to get the resources, you would name each one of them as primary beneficiaries, maybe with your companion acquiring half and your two kids getting one-quarter each. For this situation, if your spouse dies before you, your kids would remain as the primary beneficiaries.

Choosing beneficiaries

For a lot of families, the decision is to assign a youngster or the individual who might be the legal guardian of your kids. On the off chance that you don’t have kids, think about a close relative or companion. Moreover, if in case you might want to divide your assets — for instance, on the off chance that you have a lot of kids — you can apportion a specific level of said assets to every child.

You can pick pretty much anybody you want to acquire your assets in a living trust, life insurance strategy or retirement account as either a primary or contingent beneficiary. However, the one major exception to this is that the individual should be of legal age to be able to get the assets directly. In the event that the assigned beneficiary is younger than 18 or 21, contingent upon your state, the resources would initially go to a legitimate guardian. Naming a minor as a beneficiary could send the issue to probate court — a circumstance that life insurance policies and retirement accounts are advised to keep away from.

Furthermore, you must note that regardless of the amount you venerate your pet, they can’t be named a beneficiary. On the off chance that you are worried about the government assistance of your pet whenever you’re gone, you can deal with them under your last will or living trust by leaving a particular amount of cash to a trust that will be made for your pet after you pass away. In your last will or trust, you can name somebody as the trustee of the “pet trust” and that individual will be responsible for utilizing the assets for your pet’s benefit for the pet’s lifetime.

Notwithstanding, it is not necessary for your beneficiary to be a person. You could likewise name a nonprofit company or any charitable organization that you like as a primary or contingent beneficiary, however, there are extra expense ramifications that you ought to consider with this choice. Another likelihood to address with your beneficiary assignments is unimaginable: that misfortune could influence all the beneficiaries that you have selected and leave your estate to the state. You can make preparations for this by naming a far-off contingent beneficiary, which is an element or individual who might acquire your resources should none of your other beneficiaries live after you.

How to change beneficiaries?

Beneficiaries don’t have any legitimate rights to your assets during your lifetime — and may not realize they are your beneficiaries — so you can go ahead and change these beneficiaries as many times as you would want to. However, if the account is unavoidable, you can’t change beneficiaries. Retirement accounts like IRAs and 401(k)s make it simple to change assigned beneficiaries, however as this could have some serious tax consequences, especially where life partners are included, it’s critical to counsel a legal or tax expert to ensure that your issues are orchestrated in the most favorable manner conceivable.

You must recall that an estate plan is, somewhat unexpectedly, a living and breathing archive. This implies that you should audit it routinely to ensure that all of the arrangements actually impart exactly what you want to happen to your resources upon your death. At whatever point you or your friends and family experience a life occasion or change, like a birth, marriage, separation, or death, you ought to return to your will and any trusts as well as your life insurance policies and retirement records to ensure you have named your selected beneficiaries — both primary and contingent.

Likewise, in the event that you’ve had a shift in perspective about who you want to name as your beneficiary to acquire your assets, it’s an ideal opportunity to update your beneficiaries. It’s difficult to get ready for every single possibility. However, with the guidance of an accomplished home organizer, you can ensure you have orchestrated your illicit relationships to best mirror your desires, and relax by knowing that your domain will be taken care of effortlessly whenever you’re gone.

What happens if there is no contingent beneficiary?

In the event that the primary beneficiary is dead, can’t be found, or declines the resource, and there is no contingent beneficiary either, then, at that point, the resource goes into your overall estate and should go through probate. Moreover, in the event that you have a will, the resource will go to those assigned in the will. On the off chance that you don’t have a will, the resource will go to your beneficiaries as given in your state’s probate laws.

Who should be a contingent beneficiary?

Are you wondering about who should be a contingent beneficiary? Here is a list:

  • Your spouse
  • Other relatives
  • Non-relatives
  • An organization or charity
  • A trust
  • Your children (with caveats)

You must select a contingent beneficiary who relies upon your monetary help or would uphold your family on the off chance that you pass away. The vast majority pick a close relative or the guardian of their kids. Talk with a legal counselor or monetary consultant when naming a minor kid as a beneficiary on your insurance strategy. On the off chance that your beneficiary has not yet reached legal age, you’ll need to assign a caretaker for the assets or make a trust for the kid to get the death benefit when they grow up.

Naming a contingent beneficiary for your life insurance policy

At the point when you buy your life insurance strategy, you’ll have to name a primary beneficiary and a contingent beneficiary on the beneficiary assignment form. In addition to this, you’ll have to give some important information concerning every beneficiary, including:

Your strategy may likewise permit you to name individuals in numerous beneficiary levels (tertiary, quaternary, etc), yet primary and contingent designations are sufficient for the vast majority.

Updating your beneficiaries

It’s imperative to constantly update your primary and contingent beneficiaries throughout the entire term of your policy. You must review your beneficiary designations (and your inclusion all in all) any time you experience a significant life occasion like a marriage, divorce, labor, or the passing of a friend or family member. You can change your beneficiary designation whenever you want to by reaching out to your insurance supplier (or your representative or agent) and requesting to modify your beneficiary designation form.

Can a child be a contingent beneficiary?

A child can be either a primary or a contingent beneficiary. It is entirely expected to list a life partner as the primary beneficiary and children as contingent beneficiaries. Notwithstanding, if the child is a minor, a guardian should be designated to deal with the resources,at any rate until the child becomes legal. You could likewise stretch out the guardian’s service to a later age, for instance, until the child graduates from school, or until the event of another occasion you determine.

Do you need a contingent beneficiary?

Your primary beneficiary documents a case after you die to gather your strategy’s death benefit. You can name more than one primary beneficiary, and allocate a level of your insurance payout to every co-beneficiary. Naming a contingent beneficiary guarantees that you control where your life insurance proceeds go when you die. In the event that the entirety of your primary beneficiaries pass away before you do, the death benefit is disseminated to any contingent beneficiaries you named. You can name more than one contingent beneficiary and assign each to get a level of your death benefit, just as you would with primary beneficiaries.

In the event that you don’t name a contingent beneficiary and your primary beneficiary can’t guarantee the death benefit, the insurance organization pays the advantage to your estate. Once the payout is essential for your domain, it’s dependent upon home duties and probate — which means an appointed authority chooses who gets the payout — a cycle that can require months and diminish the measure of cash your friends and family ultimately get.

Pros and cons of contingent beneficiaries

Accounts with such designations are regularly alluded to as “will substitutes.” They can be valuable on the off chance that you need to stay away from probate or probably a portion of your resources. Your selection of beneficiaries will abrogate all terms that you leave in your will for similar resources. You don’t need to name either kind of beneficiary, yet these resources will wind up in your probate domain on the off chance that you don’t. That could cost your home more cash to settle. The bigger your probate home, the more exorbitant it becomes to settle, which decreases the worth of what you can leave to your probate beneficiaries. It tends to be useful to remove beneficiary records from your home.

Your arrangement could self-destruct on the off chance that you neglect to stay up with the latest. They should realize that they’re named as being either first or second in line. Moreover, they should realize the subtleties of what they’re named to get. It’s entirely dependent upon them to make claims for the resources being referred to when the opportunity arrives. You should return to your designations occasionally to ensure they actually fit your present phase of life. The need to update your home arrangement regularly happens after significant life changes, like a marriage, birth, divorce, or a death in the family. Another motivation to refresh beneficiary information is that you may basically have altered your perspective on how you need to give wealth to relatives.

What is a common mistake people make when picking a contingent beneficiary?

Individuals regularly list children who are minors, in which case they additionally need to name a caretaker. As astonishing as it could be, the misstep a few groups make is naming a guardian who is likewise the primary beneficiary. This is definitely not a reasonable game plan since the overseer would be dead for the present circumstance to occur in any case.

How often should I review my beneficiaries?

Individuals move, connections change, life occurs. It’s a smart thought to audit your beneficiary(s) in any event once every year to ensure your beneficiary assignment is exceptional. Keep in mind, you can generally change, add or eliminate beneficiaries. Also, in the event that you don’t have a contingent beneficiary on your strategy, consider adding one. Do you understand what they say about true serenity? You can never have a lot of it.


Now that you have read this article, you know all about what is a contingent beneficiary. A contingent beneficiary possibly acquires your assets if the primary beneficiary doesn’t. The account will be delivered to your subsequent beneficiary if your first beneficiary can’t be discovered, does not accept the gift, isn’t legally ready to acknowledge it, or dies before you do.

John Otero

John Otero

John Otero is an industry practitioner with more than 15 years of experience in the insurance industry. He has held various senior management roles both in the insurance companies and insurance brokers during this span of time. He began his insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. He got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how he fell in love with the industry. He saw firsthand the good that insurance consumers experienced by having the proper protection. John has diverse experience in corporate & consumer insurance services, across a range of vocations. His specialties include Major Corporate risk management and insurance programs, and Financial Lines He has been instrumental in making his firm as one of the leading organizations in the country in generating sustainable rapid growth of the company while maintaining service excellence to clients.