What is a contingent beneficiary

contingent beneficiary What is

One of the most crucial stages in purchasing a life insurance policy, establishing a bank account, or finishing your estate planning checklist is designating a contingent beneficiary because it ensures that the rightful individuals receive your assets after your demise. In the following article, we will discuss everything useful for understanding, from what a contingent beneficiary is in contexts such as life insurance or 401(k) plan to what the difference is between a primary beneficiary and a contingent one.

What is a contingent beneficiary?

what is a contingent beneficiary
To understand what a contingent beneficiary is, it is essential to learn the designation of the primary one and what it means. A primary beneficiary is an initial individual or organization designated to receive the asset.

A contingent beneficiary, also known as the secondary, is what is designated by the holder of a trust, retirement account, or insurance contract as the individual or organization that will receive benefits if the primary beneficiary cannot be found, has passed away or declines the inheritance at the time it is to be paid.

The contingent beneficiary will not be compensated if the primary one receives an inheritance. For example, if your spouse is the principal beneficiary of your estate while your children are contingent ones, then this means that the latter will only inherit if your spouse passes before you.

A contingent beneficiary is only eligible to receive insurance or retirement payouts if specific prerequisites are satisfied at the moment of the insured’s passing, such as details included in a will. Usually, the conditions that apply to the primary beneficiary would also apply to the contingent one. For example, it could be moving to a particular district or house, completing education, or performing other specific rites. Failure to fulfill the conditions would lead to the forfeiture of the proceeds.

Note! Non-spousal beneficiaries of an IRA are required to receive 100% of the funds by the conclusion of the 10th year after the IRA owner’s death as a consequence of the SECURE Act’s adoption in 2019.

Real example

Everyone is free to answer the question of what is a contingent beneficiary, appointing as such a spouse or any other person, as well as organizations, estates, trusts, or charities.

To help you understand this better, let’s take the example of Alex, who names their favorite animal care charity organization as the contingent beneficiary and their spouse Victoria as the primary beneficiary of the funds from his insurance coverage. The children of Alex cannot dispute the life insurance benefits even if he passes away before Victoria since the man designated the charity organization as the contingent beneficiary.

Advantages of naming contingent beneficiaries

When there is no will, the possessions of the departed are distributed through the legal procedure of probate. Therefore, the main advantage of determining the primary and contingent beneficiaries is the ability to divide property between specific people/organizations in particular proportions. One can save personal and family capital and a lot of effort by designating a contingent beneficiary for his retirement account or life insurance policy.

Also, the testator can include provisions that stop an inheritance from occurring if beneficiaries don’t fulfill specific requirements. For instance, an individual retirement account (IRA) owner may name the daughter as the contingent beneficiary and include a clause stating that she could only get the funds after completing college.

How many contingent beneficiaries can one name?

beneficiary contingents
The maximum number of beneficiaries that one person may have is undefined. Therefore, you are free to designate as many dependent beneficiaries as you like and to divide your inheritance in any proportion you choose.

Instead of or in addition to naming specific family members or other people as beneficiaries, you can also choose an organization to receive your capital.

Note! A contingent beneficiary cannot be named orally but is appointed by a legal instrument, i.e., insurance policy, will, living trust, etc. It is recommended to contact a qualified notary to execute the documents properly.


Now you know the answers to what is a contingent beneficiary on an IRA or life insurance and what its difference is vs. a primary beneficiary. Remember that life is unpredictable; therefore, you should always prepare yourself even for the most unexpected events. So that only the most deserving people can receive your savings, consider naming your beneficiaries now.

Alex has over 9 years of experience in the financial markets. He has worked with various financial firms globally and has expertise in technical and fundamental analysis. Alex has fulfilled various roles in his 9 years of experience and has worked as an investment advisor, financial analyst, risk management officer, manager of financial planning, and compliance and internal control officer.

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