What Is a Secondary or Contingent Beneficiary? (2024)

A secondary beneficiary, also called a contingent beneficiary, is a person or entity entitled to get a distribution of assets from an estate or trust after the estate owner’s death if the primary beneficiary is unable or unwilling to accept the assets. Secondary beneficiaries can be relatives or other people as well as trusts, charities or other organizations. Naming secondary beneficiaries can help estate planners avoid the delay and costs of going through probate as well as ensure that your wishes are carried out.

Afinancial advisor can help you decide whether you need a secondary beneficiary for your estate or trust.

Secondary Beneficiary Basics

A beneficiary is a person or entity that is eligible to receive assets after someone’s death. Beneficiaries are commonly named in wills and documents setting up trusts as well as for life insurance policies and retirement accounts. After the death of someone with an estate or trust, the assets are distributed to beneficiaries as described in the paperwork.

The primary beneficiary is the person or entity with the first claim to assets. However, sometimes the primary beneficiary may pre-decease the estate owner. A beneficiary may also refuse to accept the assets, or may be unable to be located.

As a fallback, a secondary or contingent beneficiary may be named. The secondary beneficiary receives the assets if the primary beneficiary is unable or unwilling to accept them. A secondary beneficiary may also be known as a remainderman.

Sometimes, more than one secondary beneficiary is used. Multiple secondary beneficiaries may each be entitled to receive a specified percentage of the value of the entire estate. Or more than one secondary beneficiary can be specified to get a portion of an individual asset or assets, such as a family home.

Estate planners may also nominate an additional set of tertiary beneficiaries These will receive assets if the secondary beneficiaries are not available. Some planners will choose a remote contingent beneficiary that will come into play only if all primary, secondary and other beneficiaries can’t or won’t accept the assets.

As an example, a person’s will may specify their spouse as the primary beneficiary and children as secondary beneficiaries. A more remote relative, such as a sibling or cousin, may be named as a tertiary beneficiary, while a charity could serve as remote contingent beneficiary.

Almost any asset can be bequeathed by naming beneficiaries. This includes real estate such as family homes, IRA and other retirement accounts, benefits from life insurance policies, annuities, securities, cash and other assets. Secondary and other kinds of beneficiaries can also be designated to receive personal property such as vehicles and jewelry, as well as family heirlooms and even pets.

Benefits of Secondary Beneficiaries

Naming secondary beneficiaries ensures your wishes will be carried out even if the primary beneficiary pre-deceases you or is otherwise unable to accept assets from your estate or trust. Without a secondary beneficiary, if the primary beneficiary can’t or won’t take the assets, the estate will have to go through the probate process. Probate can take a long time and add costs to the job of settling an estate.

By naming a secondary beneficiary, estate planners can avoid having the estate’s distribution governed by the state’s laws on inheritance and intestate succession. These laws may result in an outcome at odds with your wishes, including assets going to someone you don’t want to benefit. At the very least, having a secondary beneficiary can speed the process of settling the state, so that your family and other survivors can have access to cash and other assets they need to live on even if the primary beneficiary can’t be found or has already died.

Secondary Beneficiary Selection

Secondary beneficiaries have no special rights to assets in an estate during the lifetime of the owner of the estate. They do not even have to know they have been named as beneficiaries.

You can select a secondary beneficiary by specifying them in your will or trust documents. Secondary beneficiaries can also be named in documents for retirement accounts, life insurance policies, annuities and other assets

Almost any person or entity can be named as a secondary beneficiary. This includes relatives, non-relatives, charities and trusts. If you name a minor person under the age of 18, however, you will have to name a guardian for them as well. Naming a minor secondary beneficiary may also send the estate to probate.

Another prohibition bars naming a pet as a secondary or other beneficiary. Pet trusts can be used instead to support pets after your death. Finally, you can’t change the beneficiaries or other terms of an irrevocable trust. If you didn’t select secondary beneficiaries when setting up the trust, it can’t be done later.

Bottom Line

A secondary beneficiary has rights to assets in an estate or trust in case the primary beneficiary can’t or won’t accept assets when the estate is being settled. Any person or entity can be a secondary beneficiary. Secondary beneficiaries can be named in wills, trusts, insurance policies or documents for retirement and other accounts. Almost any asset can be bequeathed to a secondary beneficiary, including real estate, securities, cash and personal property. Naming a secondary beneficiary can help avoid probate and ensure the estate owner’s wishes will be carried out if the primary beneficiary has already died, can’t be found or is unwilling to accept the assets.

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