Contingent Beneficiary vs. Primary Beneficiary?
Contingent vs. Primary Beneficiaries
Think of these beneficiaries as people standing in line. The primary person is at the head of the line. The contingent person is behind them and can only move forward if the primary beneficiary moves aside for some reason. A contingent beneficiary is thus “plan B.”
| Contingent Beneficiary | Primary Beneficiary |
| Can only accept the asset if the primary beneficiary does not | Their inheritance isn’t affected or decreased by naming a contingent beneficiary |
| Ensures that your asset will go to someone of your own choosing if your first beneficiary doesn’t or can’t take it | The individual or entity you would most like to receive the asset |
Pros and Cons of Contingent Beneficiaries
Pros
- Useful if you want to avoid probate
- You can change beneficiaries as major life changes occur
Cons
- Can be costly to settle
- Can be problematic if you don’t update beneficiaries
Pros Explained
Useful if you want to avoid probate: Accounts with these types of designations are often referred to as “will substitutes.” They can be very useful if you want to avoid probate of at least some of your assets.
You can change beneficiaries as major life changes occur: Your choice of beneficiaries and any changes you make to them will override any and all terms you might leave in your will for the same assets. You might want to revisit your designations now and then to make sure they still fit your current stage of life. The need to update your estate plan often occurs after major life changes, such as a marriage, birth, divorce, or death in the family.
Cons Explained
Can be costly to settle: The larger your probate estate, the more costly it becomes to settle, which reduces the value of what you can leave to your probate heirs. It can be helpful to take beneficiary accounts out of your estate.
Can become problematic if you don’t update beneficiaries: Your plan could fall apart if you fail to keep your beneficiaries up to date. They should know that they’re named as being either first or second in line. They should know the identifying details of what they’re named to receive. It’s often up to them to make claims for the assets in question when the time comes.
Key Takeaways
- A contingent beneficiary is second in line to inherit from you if your primary or first beneficiary can’t or won’t do so.
- Retirement accounts will often revert to your probate estate if you fail to name a contingent beneficiary and your primary beneficiary dies before you do.
- You can name one or more beneficiaries in both roles.
- Updating your designations on retirement accounts or insurance policies can be as easy as filling out a form.