As you carefully craft your estate planning strategy, one of the top items on your to-do list will be to name a primary beneficiary. This is someone you designate as the recipient of your estate when you die, and they can either be related to you (daughter, son, sibling, etc.) or be a friend, coworker, or organization. But in a perfect world, you should also add a contingent beneficiary.
But wait. What is a contingent beneficiary, and why do you need one?
A Contingent Beneficiary Is Your Backup Plan.
Anyone who has engaged in estate planning before has heard of beneficiaries and been asked to name one. And more often than not, they know exactly who they’d choose before they walk in the door. This is the first person in line to receive your assets, whether that be money, vehicles, real estate, precious family heirlooms, etc. You also name them on bank accounts, brokerage accounts, retirement accounts, insurance policies, and more. This way, you know everything will go to the person you’ve designated.
A contingent beneficiary is the next person(s) or entity in line. They receive assets from your estate if your primary beneficiary is no longer an option to receive the assets. This is typically the case if the primary beneficiary:
• Has died or is incapacitated
• Is legally unable to claim or manage the assets (for example, a minor)
• Can’t be located or properly identified
• Refuses to take possession of the assets
So, think of your contingent beneficiary as a backup plan. If you do not name a contingent, there is a higher likelihood that the unreceived or unclaimed assets meant for your primary beneficiary will return to your estate. This could tie everything up in probate court for months or years. And let’s not overlook the potential for in-family fighting and increased expenses.
The good news is that you can choose as many primary beneficiaries as you want and split the assets accordingly. You can do the same with a contingent beneficiary, provided their individual percentages add up to 100%.
Contingent beneficiaries don’t receive assets if the primary beneficiary is alive and able to receive the assets.
Call Caitlyn Ashley Law Today!!
Having a plan for the future is the most important gift you can give yourself and your family. Granted, none of us will ever know for sure what is around every corner in life. And just thinking about the what-ifs — what if I were to die or become incapacitated tomorrow; what if my child with special needs has no one to care for her; what if all my “stuff” isn’t passed onto the right people — can be overwhelming. But having a plan that accounts for your family’s unique circumstances, puts your affairs in order, has concrete solutions to your concerns, lays out your wishes and goals, and protects your family’s future provides peace of mind for the road ahead.
Caitlyn Ashley Law in Denton, Texas, will counsel you on which documents are best suited for your needs and ensure they are flexible enough to meet your changing needs for years to come.
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