When you want to pass your assets and other belongings onto someone else after you die, you choose a beneficiary. Most people automatically list their spouse, children, or sibling, while others might include a charity or nonprofit. This is an essential piece of estate planning, and congratulations if you already made those selections. But please also remember to include a contingent beneficiary.

Most people have an estate planning attorney to ensure this important task is completed. Sadly, others either overlook it, are unaware they need one, or fail to know the difference between a beneficiary and a contingent beneficiary.

What Is the Difference Between a Beneficiary and a Contingent Beneficiary?

Beneficiaries are people or organizations you name in legal documents (will or trust, life insurance policy, bank account, IRAs, 401(k), etc.) to ensure everything you own gets into the right hands after you die, and everyone you love is protected as they move forward without you. Essentially, they are the beneficiaries of your estate — whatever that may look like for you.

Within the beneficiary designation itself, however, there is a primary and contingent beneficiary.

Primary beneficiaries (you can name more than one) are first in line. Contingent beneficiaries are “next in line” and only receive assets should all your primary beneficiaries no longer be an option to receive those assets.

A contingent beneficiary would step in if your primary beneficiary:

• Is deceased or is medically incapacitated
• Cannot be located or correctly identified
• Refuses to take possession of the assets
• Is a minor and cannot legally manage the assets yet

Take, for example, Jane. When she established her Will, she named her husband and children as equal primary beneficiaries of her estate. She also listed her brother, Fred, as her contingent beneficiary. As it turned out, both her children died while serving our country, and her husband passed away. In this scenario, Fred would receive everything if he was the last surviving beneficiary.

Since Jane spelled out exactly who she wanted as beneficiaries and went the extra mile to name a contingent beneficiary, there were no questions, hurt feelings, or arguments among her surviving family and friends. Her wishes were followed.

What Happens If I Do Not Name a Contingent Beneficiary?

Let us assume that Jane did not have a contingent beneficiary in the example above. In that new scenario, there is a higher likelihood that the unreceived or unclaimed assets would have returned to her estate and be subject to probate court. We cannot be sure what that might look like for your estate until we sit down with you and discuss your unique situation.

At Nelson Law Group, we carefully guide you through the estate planning process and help you make thoughtful, informed decisions. This includes helping you choose the appropriate number of beneficiaries. Estate planning documents we help prepare include:

• Last Will and Testament
• Revocable Living Trusts
• Durable Powers of Attorney
• Medical Authorizations
• Burial Directives
• Declarations of Guardian
• Advanced Healthcare Directives/Living Wills

Call Nelson Law Group Today!!

When it comes to protecting your family’s future for years to come, it is imperative to have an estate planning attorney in your corner. If you have any questions, give our knowledgeable staff at Nelson Law Group, PC, a call. Our staff is always available.

For more information about Brett A. Nelson, click here.