What is a Contingent Beneficiary

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A contingent beneficiary is someone who receives a life insurance benefit or retirement account balance if the primary beneficiary doesn’t want to or isn’t able to do so.

🤔 Understanding Contingent Beneficiary

When you purchase a life insurance policy, you’ll have to choose your primary beneficiary. This individual is the one who receives the insurance benefit if you pass away. But you’ll also have the opportunity to select a contingent beneficiary. This person will receive the death benefit if the primary beneficiary won’t or can’t accept it — This might be the case if the primary beneficiary has also died. Alternatively, it could be the case that the primary beneficiary declines the benefit. A contingent beneficiary usually applies to life insurance policies, but you might also have a primary and a contingent beneficiary on your 401(k) plan or your individual retirement account (IRA).


Alan and Joanna, a married couple with adult children, both purchase term life insurance policies and names the other as the primary beneficiary. Alan passes away first, and Joanna receives the life insurance benefit. When Joanna passes away, the benefit can’t go to her primary beneficiary since he is also deceased. Instead, the benefit goes to Joanna’s adult children, since she named them as her contingent beneficiaries.


Contingent beneficiaries are like the line of succession in a monarchy...

If the queen of a monarchy were to die, the line of succession dictates who will inherit the throne, most likely her son or daughter. However, if her child were to decline the crown or had previously passed away as well, the king or queenship would be bestowed upon the next person in line. Like this line of succession, when you die, your primary beneficiary is the person you most want to receive your life insurance benefit or other assets. Most often, this person is an immediate family member like a spouse, parent, or adult child. But if this doesn’t go as planned (maybe they decline the benefit or have also passed away), then the insurance company will move onto the designated contingent beneficiary, giving your life insurance benefit to the next-in-line.

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Why do you need a contingent beneficiary?

Many financial accounts allow you to choose a beneficiary. The most obvious example is a life insurance policy, which you purchase for the express purpose of providing a financial benefit to your loved ones if you die. This money can help to pay for a funeral or to replace your income for your financial dependents.

Other accounts also allow you to establish a beneficiary. When you set up a 401(k) plan or individual retirement account (IRA), your servicer will usually let you name a beneficiary who should receive those assets when you die.

While you might know who you would want to receive your assets if you die, there’s always the chance they won’t be able to accept it. For example, your primary beneficiary could die before you. For that reason, you should also name a contingent beneficiary. This person will inherit your life insurance benefit or other assets if the primary beneficiary dies before you. The primary beneficiary could also willingly turn down the assets, in which case they would go to your contingent beneficiary.

You might designate someone to be the beneficiary contingent on your primary beneficiary being unable or unwilling to accept the benefit. But you could have it contingent on something else.

One example of a contingency might be someone’s age. Let’s say you’re a single parent, and you want to make sure your minor children are taken care of if anything happens to you. If your children are adults by the time you die, the benefit will go to them. But that is contingent on them being old enough to accept the benefit. In this case, you might designate a different loved one, such as a parent or sibling. If your children are under 18 when you die, the money goes to the other loved one. Typically there are other estate planning tools in place such that minor children’s inheritance is not given directly to the older relative but in a trust until a certain age is reached. If/when the children are over a specified age, they’ll get the money.

You should always have a back-up plan in place for any inheritable assets you have. If you haven’t designated a beneficiary or your primary beneficiary has died, and you don’t have a contingent one, then your assets may not go to those you intended, can be delayed, or may trigger additional costs.

If that happens, an individual may have to fight in court to receive your assets, even if it’s your adult child who you would want to inherit them. Not only would it be a lengthy process, but it would result in them having to pay legal fees as well.

What is the difference between a contingent beneficiary and a primary beneficiary?

When you purchase a life insurance policy or open an account such as a 401(k) plan or individual retirement account (IRA), you’ll designate someone to receive your assets if you die. This person is your primary beneficiary.

You can name one primary beneficiary, and that person will receive all of your inheritable benefits. You can also designate multiple people, who will each inherit a portion of the assets. If you don’t specify what part they should each receive, they will each generally receive equal parts.

Your primary beneficiary is the person you would most like to receive your inheritable assets when you die. The contingent beneficiary will only receive the assets if the primary benefit either cannot accept the benefit, such as if they died before you, or if they decline the assets.

What is the difference between a contingent beneficiary and a co-beneficiary?

The contingent beneficiary can receive your assets only if your primary beneficiary dies before you or declines the inheritance. But it’s also possible to have a second primary beneficiary. This person is the co-beneficiary.

A co-beneficiary could work in a few different ways. First, your two co-beneficiaries could split your assets evenly if you die. Another option is that you specify what percentage of your assets each person would get. Or, in your will, you can dictate which specific assets go to which beneficiary.

For example, let’s say you’re designating your life insurance beneficiaries, but don’t have a spouse or dependent that you want the money to go to. Instead, you might choose to add your siblings as co-beneficiaries so if you pass away, they will each receive a proportion of your death benefit.

Who should be your contingent beneficiary?

You can choose whomever you want as your contingent beneficiary. The primary beneficiary is most often the person closest to you who depends on your income — This is often a spouse or child of yours. Your contingent beneficiary is usually also a close loved one, such as a parent or sibling. But ultimately, for your accounts, you can choose whomever you want as the contingent beneficiary.

The one exception is that children under the age of 18 usually cannot legally accept an inheritance. You can name a child as your contingent beneficiary, but you’ll have to put some other guidelines in place as well. You’ll have to designate someone as the child’s legal guardian, or trustee, who will accept the money on their behalf.

In some cases, an individual might need to be as old as 21 years old to receive a benefit from a life insurance policy or an estate. For example, an 18-year-old in Colorado can only inherit up to $10,000. If the amount is more substantial, they have to wait until 21 to receive it.

You can also choose more than one contingent beneficiary if you want. A parent might designate their spouse as the primary beneficiary. You could name all of your adult children as your contingent beneficiaries. Then, if your spouse dies before you, the contingent beneficiaries would each receive an equal portion of your assets.

In most cases, you can go back and change your contingent beneficiary later. To do that, you would just need to contact the insurance company or other entity that holds your inheritable assets like your life insurance policy. The only exception is if your account is irrevocable, which can be the case with some insurance policies and trusts.

In reality, it would be a good idea to reevaluate your primary and contingent beneficiaries occasionally. A lot can change over several years, which may result in your wanting to change your beneficiaries.

For example, you may have gotten divorced and no longer want to name your ex-spouse as your beneficiary. And if you have children from that marriage who aren’t old enough to accept an inheritance, you’ll have to decide who you would want to accept it on their behalf.

You could also be proactive and change your account beneficiaries if your primary beneficiary dies. In that case, you could re-designate your contingent beneficiary as the primary and choose an alternative contingent beneficiary.

Your contingent beneficiary also doesn’t have to be a person. Instead, you could choose a charity or non-profit organization that is near and dear to your heart to receive the money if your primary beneficiary cannot.

What is a tertiary beneficiary?

A tertiary beneficiary is a person who would receive your inheritable assets if the primary and contingent beneficiaries are both unable or unwilling to do so. Think of this person as the contingent beneficiary to your contingent beneficiary.

It is not likely that the tertiary beneficiary would end up inheriting your assets. One example of when this might be possible is if you, your primary beneficiary, and your contingent beneficiary all die either in the same event or very close together.

For example, let’s say you are married with two children — One of your children is over the age of 18, and one is under the age of 18. Your spouse is your primary beneficiary, and your adult child is the contingent beneficiary. If you, your spouse, and your adult child were to all die in a car accident together, your assets would go to a tertiary beneficiary (if you have one).

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