An elderly couple discussing their beneficiary document

What is a Contingent Beneficiary and Why Do You Need One?


Naming a primary beneficiary makes it clear who is first in line to receive their assets when they die. But what happens if the primary beneficiaries die before the person with the assets, or are unable to be located or refuse to take possession of the assets at the time they are to be transferred?

Many people who have engaged in estate planning have named primary beneficiaries for their assets, including bank accounts, brokerage accounts, retirement accounts, health savings accounts, 529 college savings plans, insurance policies, trusts, and wills.

Naming a primary beneficiary makes it clear who is first in line to receive their assets when they die. But what happens if the primary beneficiaries die before the person with the assets, or are unable to be located or refuse to take possession of the assets at the time they are to be transferred?

Importance of Contingents

In these cases, you need a contingent beneficiary who can step in and inherit the assets. Think of contingent beneficiaries as a backup plan.

Otherwise, the testator’s estate may have to go through probate court, which can take months or even years. It also can result in intense squabbling among family members, sometimes involving expensive lawyers. And there’s no certainty that the ultimate distribution decisions will match your wishes.

Splitting Assets

You can split up assets among beneficiaries any way you want. You can choose as many primary beneficiaries and as many contingent beneficiaries as you desire.

For example, your primary beneficiaries may be your wife, who receives 50 percent of your estate, and your two children, who each receive 25 percent. And your contingent beneficiaries may be your three grandchildren, who each receive one-third of the estate. Of course, the percentages must add up to 100.

Contingent beneficiaries receive nothing if primary beneficiaries are alive and meet all the qualifications you set for them to inherit assets.

A common use of the contingent beneficiary designation is for children. Testators’ trusts often provide distributions for children, but only after they reach a certain age. In this case, the children are contingent beneficiaries until reaching the specified age, when they can become primary beneficiaries.

Achievement, Disability Conditions

Contingencies also can be achievement-oriented, such as making distributions conditional on graduation from college, or need-based, such as a disability or illness that necessitates funds for treatment.

Contingent beneficiaries can sometimes help primary beneficiaries if the primary beneficiary isn’t legally able to claim or manage the assets. For example, perhaps your spouse is your primary beneficiary but becomes incapacitated and is thus unfit to handle your assets. If an adult child is a contingent beneficiary, they can receive the assets, under the condition that they help care for your spouse.

Keep in mind that your beneficiaries don’t have to be people. You can give as much of your estate as you want to your favorite school, foundation, charity or even a sports team. There are some limits: you can’t give financial accounts or an entire will to minors or pets, because they do not have the legal power to accept assigned assets.

In any case, you’ll likely want the assistance of a financial advisor to establish both your primary and the secondary beneficiaries. Keep in mind that naming beneficiaries can be much more complicated when it’s beneficiaries for a trust or non-profit organization as opposed to a 401(k) plan or IRA.


With most accounts, you can change your primary and contingent beneficiaries whenever you please. But be aware that’s not the case with some insurance policies and trusts, which are known as irrevocable accounts. So be very careful before you designate your beneficiaries for these accounts, as you won’t be able to change them. Again, assistance from your financial advisor might prove quite useful in these instances.

Importance of Updates

It’s important to continuously update your beneficiaries. You might have a 401(k) account, IRA account or life insurance policy that’s more than 40 years old. Some of the beneficiaries may no longer be alive, or perhaps there’s been a divorce in the family that has led your beneficiary wishes to change. Maybe there are now children or grandchildren who weren’t born when you first established your beneficiaries, and now you’d like to add them.

Beneficiary designations for your specific assets are particularly important in that they trump what’s in your will should they differ. So you want to make sure they match, guaranteeing that your assets will be distributed as you desire.


When you assign primary and contingent beneficiaries for your assets, make sure they’re identified clearly in all paperwork. You’ll want to include each beneficiary’s full name and Social Security number. And for an organization, you’ll want to include its tax identification number. One error some people make when designating beneficiaries is to use the title “wife.” That makes matters murky if you get divorced and remarried.

It might be a good idea to consult regularly with your financial advisor to keep all your beneficiary designations in order. It’s also a good idea to give both your primary and contingent beneficiaries copies of the documents specifying all the beneficiaries and their status.

To make a claim, contingent beneficiaries must be able to prove that primary beneficiaries are unable to do so. That means they need to know who the primary beneficiaries are. It also might require obtaining death certificates for the primary beneficiaries, so contingent beneficiaries should have the contact information for primary beneficiaries’ families.

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