You can name a backup beneficiary in your will to receive assets and property in case your primary beneficiary cannot.
A contingent beneficiary in a will receives an asset when the primary beneficiary cannot or does not want to receive the asset
If the primary beneficiary of a will is dead and there’s no contingent beneficiary, state anti-lapse or intestacy laws determine who receives the assets
You can also name contingent beneficiaries for life insurance policies, payable-on-death accounts, and trusts
A well-crafted estate plan includes a last will and testament, which states what happens to your property and assets when you pass away. One of the most important components of a will are the beneficiaries, the people or entities receiving your assets. But what happens if your primary beneficiary isn’t around when you pass away? That’s where the contingent beneficiary comes in. A contingent beneficiary in a will, also known as the secondary beneficiary, is the next person in line to receive the asset. They only inherit if the primary beneficiary is dead, cannot be located, or chooses not to accept the inheritance. Financial accounts and life insurance policies similarly allow you to designate contingent beneficiaries to get the money or proceeds.
You can choose almost anyone you want to be the contingent beneficiary in your will. If you don’t name one, the court will determine who receives the asset according to state law, which means the person you ultimately wanted to receive your property and belongings might not get them.
A contingent beneficiary is the backup recipient who gets your assets. If the main beneficiary, or primary beneficiary you named in your will has died, cannot be located, or refuses the inheritance, then the contingent beneficiary receives the asset instead. If you have multiple primary beneficiaries and one of them predeceases you, the contingent beneficiary only receives the share of that deceased primary beneficiary. The other primary beneficiaries who are alive would still receive their inheritance.
A third backup beneficiary is called a tertiary beneficiary to receive your assets.
Choosing a contingent beneficiary has the same restrictions, or lack thereof, as choosing a primary beneficiary. You can name another family member, friend, business, or charity. Just don’t name the same person as both primary and contingent beneficiary in your will since that would defeat the purpose of this designation. Keep in mind that if you name a child as a contingent beneficiary of your will, then they may not be able to possess the asset until they reach the legal age of the majority (often 18). Their legal guardian will hold the asset for the time being.
You can create a will using the Policygenius app to name a guardian for your children and designate beneficiaries for your assets.
If the primary beneficiary can’t receive an asset and there is no contingent beneficiary named in a will, then there is no one to inherit the asset. An asset without a proper beneficiary is called a “lapsed gift” or a “failed gift.” Who ends up receiving it depends on the state’s anti-lapse laws and the construction of the will.
You can expect one of the follow things to happen:
When the deceased beneficiary of a will is related to the testator (will writer), the lapsed asset typically goes to their direct descendant. For example, let’s say you write a will and make your daughter the contingent beneficiary. Should the primary beneficiary and the contingent beneficiary predecease you, her child would receive her share instead. This rule doesn’t always apply to non-blood beneficiaries though. For example, if you named your friend Joe as the contingent beneficiary in your will and he predeceases you, his share may not necessarily go to his children.
Depending on the terms of the will, the asset may just become part of the residuary estate instead and be distributed according to the terms of the will. It’s also possible for the heir to be determined through state intestacy laws, which are used when someone dies without a will.
State law may also implement per stirpes or some version of it when it comes to distributing the deceased beneficiary’s inheritance. If you have a complex estate or specific distribution plans in mind, you may want to speak with an estate lawyer. They will be able to help craft your will to ensure every scenario is accounted for when it comes to contingent beneficiaries.
Related article: How to find an estate planning attorney.
You will encounter contingent beneficiaries in other areas of estate planning. Financial accounts, like a retirement account or bank account, can be made payable-on-death (POD) with a beneficiary designation. You can usually name a contingent beneficiary in addition to a primary one to receive these payable-on-death accounts outright when you die.
You can also name a contingent beneficiary for a life insurance policy to receive the death benefit if your first-choice beneficiary is unable to do so.
Another way to pass on assets and property as part of your estate plan is with a living trust. You can name a contingent beneficiary in the trust document. Just like, POD accounts and life insurance, trust assets are transferred to their designated beneficiaries outside of probate.
Learn more about how a revocable trust works.
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About the author
Elissa is a personal finance editor at Policygenius in New York City. She writes about estate planning, mortgages, and occasionally health insurance. In the past she has written about film and music.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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