Secondary or contingent beneficiaries are those who will inherit assets if the primary beneficiary is no longer able to inherit, generally because they died before or simultaneously with, the estate’s grantor. A secondary beneficiary can be an individual or an entity. For example, the primary beneficiaries of an estate can be the children of the grantor and the secondary beneficiary can be a nonprofit that inherits if both the grantee and their children die.
Secondary beneficiaries only inherit when the primary beneficiary does not. This could be because of the primary’s death, but could also be because they disclaim their inheritance or could not be located in a reasonable amount of time.
When do you Name a Secondary Beneficiary
There are a number of different places where you might choose to designate a secondary beneficiary. In your estate plan, for example, you may designate a secondary beneficiary. Estate plans often have them, especially when designating what will happen to children and assets held in trust for children upon the death of the parents. Similarly, retirement and investment accounts, and other types of inheritable assets, often require you to designate a second option on the beneficiary of the funds. Trusts should also have both secondary beneficiaries and secondary trustees named to ensure that the trust continues to operate as intended.
If you fail to name a secondary beneficiary on certain types of accounts, then the account must go through the probate process and be managed according to your will or, if there is no will or that document doesn’t apply, intestate succession. This may mean that your assets go to a family member who you would otherwise not want to inherit or would escheat to the state. If no one in your family survives you, you may prefer to donate your assets to charity than to the state.
Keeping Track of Beneficiaries
Periodically, it is a good idea to update your estate plan. This means revisiting your will and beneficiaries, any trusts you’ve set up and funded, and inheritable accounts. You may take this time to change the beneficiaries on your accounts if your marital status has changed, you’ve had children, or just changed how you want to handle your assets as your life has progressed.
At Dunn Law Firm, we strive to make sure your estate plan is comprehensive and includes all the details necessary to protect your assets and distribute them to your family and preferred charities. We will make sure you take the time to name both primary and, where important, secondary beneficiaries to inherit your assets. To learn more, reach out to the Dunn Law Firm by calling (435) 628-5405 to set up a free consultation today.