When it comes to estate planning, there’s no one-size-fits-all approach. People have the right to decide who gets what when their time comes, and part of that choice is determining and naming a contingent beneficiary.
A contingent beneficiary is someone who is designated to receive the proceeds of an estate or trust if the primary beneficiary predeceases the person responsible. In other words, when a will, estate, or trust specifies one initial recipient and then a contingency for what should happen if that first person cannot accept the property, then the remaining beneficiary is known as a contingent beneficiary.
A contingent beneficiary is the backup plan in estate planning, and it’s important to plan not only for the initial transfer of assets but also beyond. Without a contingent beneficiary named it may signal an oversight or simply an incomplete plan.
What Can a Contingent Beneficiary Do?
While contingent beneficiaries have the potential to have a large impact on the transfer of assets, most of the time they may not see any benefit if the primary beneficiary survives the original donor of the estate or trust. Contingent beneficiaries can, however, petition the probate court for a larger share if they feel that their portion of the estate or trust has been unfairly reduced.
Contingent beneficiaries are also responsible for working with estate attorneys to settle the wills of the deceased in order to execute the terms of the estate or trust. They are usually in charge of making sure all other debts have been settled before they receive their portion of the inheritance.
Why Is It Important to Name a Contingent Beneficiary?
Naming a contingent beneficiary assures that the assets of the will, estate, or trust are securely utilized even if the primary beneficiary or heirs are deceased or unable to claim them. When establishing a trust or will, it’s important to name both a primary and a contingent beneficiary to make sure that the assets will not be left in limbo in the event of an unforeseen tragedy.
It’s vital to make sure when setting up a will, trust, or estate that all interested parties are included, even the contingent beneficiary. Those named as a contingent beneficiary should be made aware of the fact as well so there are no surprises if it’s ever needed.
Understanding the concept of a contingent beneficiary is essential for estate planning and ensuring that all assets are properly and securely transferred. By taking proactive steps to thoroughly detail your estate plan, you can be sure your assets are transferred exactly the way you wanted.