What Is a Contingent Beneficiary?

A contingent beneficiary is someone who will receive money or assets in the event that the primary beneficiary is deceased or incapacitated. Contingent beneficiaries are designated when a person sets up an estate plan or life insurance policy. With estate plans, the same person can be both a primary and contingent beneficiary. However, for both estate planning and life insurance policies, an individual may designate multiple contingent beneficiaries.

In estate planning, a contingent beneficiary is designated when a person sets up a last will and testament. This will identify who will receive money or assets in the event that the primary beneficiary has died or become legally incompetent. For example, if a person names their spouse to receive money when they pass away, the spouse may be designated as the primary beneficiary. They could then designate their children as the contingent beneficiaries, so that if their spouse were to pass away before them, the money would still be distributed to their children.

With life insurance policies, a policyholder can designate beneficiaries who will receive the payout if the primary beneficiary has died. The policyholder can name one or multiple people as primary beneficiaries, and then name one or multiple people as contingent beneficiaries. They can also designate contingent beneficiaries to receive a portion of the life insurance proceeds if both primary beneficiaries have passed away. This ensures that the money will still be distributed to those who the policyholder intended to receive it.

Conclusion

It is important to understand what a contingent beneficiary is if you are working on setting up an estate plan or life insurance policy. A contingent beneficiary is someone who will receive money or assets if the primary beneficiary has died or become incapacitated. When setting up estate plans or life insurance policies, an individual can name one or multiple contingent beneficiaries to guarantee the money is received by the people they intended it to go to financially.