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Primary vs Contingent Beneficiary

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An estate plan can be successful only if your estate is distributed efficiently among your heirs, loved ones, and other beneficiaries you choose. However, this is easier said than done.

If you have started your estate plan, you know that you need to know more about the people that you choose to pass on your assets to. One of the primary tasks of the testator (the person writing the will) is to understand who should be which beneficiary.

The most commonly used types are primary beneficiaries and contingent beneficiaries. However, they can be quite confusing to understand and implement in your plan. But don’t worry, this article will guide you through the basics of each type of beneficiary and their differences and similarities.

So, what is the difference between a primary and contingent beneficiary?

Primary vs Contingent Beneficiary

Order of priority for primary vs contingent beneficiary

A primary beneficiary is first in line to receive the benefits from your estate after you pass away. A contingent beneficiary, on the other hand, will receive your estate distributions only if none of your primary beneficiaries are available. This is why they are often referred to as secondary beneficiaries or backup beneficiaries as well.

You can have multiple primary beneficiaries and contingent beneficiaries. You also need to specify the percentage of your estate proceedings they should receive.

For example, you can add your spouse and two children as primary beneficiaries and share 50% of the assets with your spouse, 25% with each child, and name your siblings as contingent beneficiaries with an equal share of your assets.

Benefits of Naming for primary vs contingent beneficiary

While naming a primary beneficiary lets your executor and the court know who should inherit your assets, naming contingent beneficiaries lets the same people know how to act in case of an emergency. So, while the function of both types of beneficiaries may be similar, their purpose is different.

For example, you can name your spouse as your primary beneficiary and your two kids as contingent beneficiaries. Your spouse will receive all the benefits from your estate and your children would get nothing. However, if your spouse declines the inheritance, can’t be found, or predeceases you, your children would receive the estate proceedings in the percentage that you specify.

Rights of primary vs contingent beneficiary

The rights of each beneficiary are largely dependent on their order of priority. So, naturally, the primary beneficiary has a complete claim to the assets of the deceased’s assets. The contingent beneficiary, however, can exercise their rights to claim the assets only if the primary beneficiary is not available.

In both cases, the beneficiary’s rights would be the same and they can ask the executor to:

  • Be treated equally as all beneficiaries
  • Ask for details on transactions and accounting of all assets
  • Revoke the status of the executor along with other beneficiaries

Choosing primary vs contingent beneficiary

While choosing someone as your primary and contingent beneficiaries, it is important to keep the purpose of each category in mind. Primary beneficiaries are generally financially dependent on you and are economically responsible too. They could be immediate family members, like spouses, elder parents, and children.

Contingent beneficiaries, on the other hand, are people second in line with regard to both aspects. They may have different sources of income and/or are financially irresponsible. Most often, contingent beneficiaries are grandchildren, other relatives, or friends.

Primary vs Contingent Beneficiary FAQs

Can the same person be a primary and contingent beneficiary?

A contingent beneficiary acts as a backup in case your primary beneficiary is not available. Naming someone as both primary and contingent beneficiary defeats the purpose and doesn’t add any benefit or value to your estate plan, although you may choose to do so.

Can a child be a contingent beneficiary?

You can name a minor as a contingent beneficiary. However, they do not have any right to the assets until they are of age. You need to add a guardian to manage the minor’s assets until they turn major.

While planning for your estate, don’t forget to add your digital assets too!