What is a Contingent Beneficiary?

Why Contingent Beneficiaries Matter

Question: I have named two family members as beneficiaries in equal shares on my portfolio. I was advised to also name contingent beneficiaries.

What is a Contingent Beneficiary?

Will you explain what a contingent beneficiary is and what might happen if none are named? Also, I have named a different family member as POD (Pay on Death) on my savings accounts. Should a contingent beneficiary be designated on them as well? G.H.

Answer: A contingent beneficiary (a person, trust or charity) would receive your assets if the primary beneficiary (your first choice) should die before you and you fail to make any changes. For example, assume you buy a life insurance policy. It’s common to name your spouse as the primary beneficiary of your life insurance and your child as the contingent beneficiary. If your spouse predeceased you and you died having not made any changes to your beneficiary designation, your child would automatically receive the life insurance proceeds. If you had no contingent beneficiary, the proceeds would transfer according to your will. If you did not have a will, the proceeds would transfer based on the state laws (called intestate) in which you reside.

Your beneficiary designations are very important and should be thought through very carefully since a mistake can have unintended consequences. In this reader’s case, certainly no contingent beneficiary is required as long as she is ok knowing that if one of them predeceases her all of the portfolio will go to the remaining beneficiary. Of course, she can change beneficiaries at any time.

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