A contingent beneficiary is an individual or entity who will Inherit the Assets of a deceased person if the original Beneficiary, known as the Primary Beneficiary is deceased, unavailable, or ineligible.
In other words, contingent beneficiaries are "backup" beneficiaries named in a legal document, such as a Last Will and Testament, Trust, Life Insurance policy, or retirement account, who come into play if the primary beneficiaries are unable to inherit the deceased's Estate, or decline the assets for some reason.
Contingent beneficiaries are subject to the same legal requirements and considerations as primary beneficiaries. They have legal rights to inherit the assets as specified in the deceased's Estate Plan.
Over time, circumstances may change primary and contingent beneficiaries, so it's important to regularly review and update designations to ensure that wishes are accurately reflected.
Examples of contingent beneficiaries include:
- If a will designates a spouse as the primary beneficiary of an estate, with children as contingent beneficiaries, the children would inherit if the spouse predeceases the deceased person
- In a life insurance policy, a primary beneficiary could be a spouse, and the contingent beneficiaries could be children or siblings
Common scenarios of contingent beneficiaries include:
- If a primary beneficiary dies before the person leaving the assets (the Testator), the contingent beneficiary would receive the inheritance
- If the primary beneficiary is incapacitated, a Minor, or otherwise unable to inherit, the contingent beneficiary may receive the assets
- If a primary beneficiary disclaims or renounces their right to the inheritance, the contingent beneficiary could step in to receive it