- Contingent Beneficiary
- Rights of Primary Beneficiary Vs. Contingent Beneficiary
- What is a contingent beneficiary?
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A life insurance beneficiary is a person who will receive the payout from a policy if you were to die. The proceeds from the payout can be used to help pay for financial needs — those that come with death, such as funeral arrangements and other end-of-life expenses, along with day-to-day bills like the mortgage and child care. You can name two or more people as beneficiaries, outlining the percentage of the policy payout each would be given. You can also name a contingent beneficiary, who could receive the death benefit if something happened to the primary beneficiary. For some, designating two primary beneficiaries — say, a spouse or partner and a parent — may make sense, especially if both could face financial hardship. For others, one primary life insurance beneficiary, with a contingent beneficiary named, makes the most sense.
A contingent beneficiary is someone or something that receives the benefits of an account if the primary beneficiary can't or won't do so after the account owner's death. Contingent beneficiaries stand in the wings, next in line to inherit if something should go wrong. Think of them as a backup plan. Contingent beneficiaries can only inherit if the primary beneficiary does not. The account manager will release the asset in question to your contingent beneficiary if your primary beneficiary can't be located, declines the inheritance, isn't legally able to accept it, or predeceases you. When you invest in a beneficiary-named financial account, such as an individual retirement account IRA , a k , or an insurance policy , you should name the individual or institution you want to receive the assets in the account when you die.
A contingent beneficiary is specified by an insurance contract holder or retirement account owner as the person or entity receiving proceeds if the primary beneficiary is deceased, unable to be located, or refuses the inheritance at the time the proceeds are to be paid. A contingent beneficiary is entitled to insurance proceeds or retirement assets only if certain predetermined conditions are met at the time of the insured's death as can be found in a will. For a contingent beneficiary of a will, virtually any conditions may be in place; it depends entirely on the person drafting the will. A contingent beneficiary will receive nothing if the primary beneficiary accepts an inheritance. For example, let us say Cheryl lists her husband John as primary beneficiary for her life insurance policy and their two children as contingent beneficiaries.
If you've filled out paperwork for life insurance or a retirement account, you've probably come across the terms "primary" and "contingent" beneficiary. But what's the difference between the two concepts, and how do their rights affect the transfer of assets? First, let's define the word that they both have in common: "beneficiary. Contingent vs. There can be multiple primary and contingent beneficiaries, but contingent beneficiaries only receive their benefits in the event that none of the primary beneficiaries survive the account holder. The account holder also named his three adult children as contingent beneficiaries. In this instance, the man's wife would be first in line to receive all of the assets because of her status as a primary beneficiary.
A contingent beneficiary is a person, estate or trust that receives the assets of a person who dies if the primary beneficiary, for any reason, cannot receive the assets. It is commonly recommended by attorneys when their clients are making a will to have at least one contingent beneficiary. It is possible to have several contingent beneficiaries and they can be listed in a specified order. After a person dies, his or her assets will usually go through probate. The probate process can be avoided and the assets more efficiently passed to the heirs if primary and contingent beneficiaries are named.
Rights of Primary Beneficiary Vs. Contingent Beneficiary
What is a contingent beneficiary?
Who is Contingent Beneficiary? - Definition and Insurance Tips