What’s the difference between a primary vs. a contingent beneficiary?

And why you need both in your estate plan

You’ve worked hard for your family most of your life. Naming beneficiaries can keep all your hard work you’ve provided to benefit your family where it belongs, ensuring generational wealth. When it comes to naming beneficiaries, you’ll need a primary beneficiary and a contingent beneficiary. But do you need both? Once you understand the difference between the two, the answer is simple: yes.


What is a primary beneficiary?


A primary beneficiary is just what the name infers: the first person or people you want to leave your financial assets, property, life insurance, or heirlooms to when you die. Your estate planning attorney will have you name a primary beneficiary for these areas of your estate plan:

  • Life insurance policies
  • 401ks
  • IRAs
  • Other Investments and mutual funds
  • Non-retirement bank account balances
  • Residential or business properties or businesses
  • Family heirlooms or valuables

Remember, your estate plan is unique to you and can be customized as so. You may name a different person as a primary beneficiary for each area of your estate or leave it all to one beneficiary. The choice is yours.


With that in mind, we are planning for the future, and that may also mean that you may outlive your primary beneficiary or maybe that person refuses to take on the role of primary beneficiary to which you’ve given them. Then what? That’s where a contingent beneficiary comes in.


What is a contingent beneficiary?

Think of a contingent beneficiary as a runner-up to your primary beneficiary. If something happens to your primary beneficiary, your contingent beneficiary is next in line.


Why do I need both a primary and contingent beneficiary? What if I only want my assets to go to one family member?


Anyone who has lived a little life knows that best-laid plans don’t always go accordingly. Of course, it’s your estate plan, and you may customize it however you see fit, BUT naming a contingent beneficiary ensures your hard-earned assets stay out of the decision of the courts and in your control.


For example: Joan named her brother as her primary beneficiary and named her nephew as a contingent beneficiary. Joan became very ill, and her brother, unfortunately, got into an accident and died. Joan didn’t update her will and estate plan because she was too sick and passed away. Still, because she named her nephew her contingent beneficiary, he would receive all of the assets she had set aside for her primary beneficiary. Because Joan planned for the worst-case scenario, her plan provided for her family’s next generation and kept her assets out of probate.


Suppose you genuinely do not have anyone else you’d like to be a beneficiary of your assets. In that case, you can also name an organization such as a charity or non-profit to be your contingent beneficiary.


What happens to my assets if I die and don’t have any beneficiaries?

Sometimes people think naming one or two beneficiaries isn’t fair and might cause arguments, so to keep the peace, they won’t name anyone as a beneficiary under the assumption that their family will “just work it out.” This is a huge mistake in estate planning and one that will surely backfire, and in all honesty, create more chaos than peace. In all likelihood, your estate will go to probate, and your family will have to spend time and energy ironing out the details in court.


Signing your will and hoping for the best is a bad plan, plain and simple. You must designate beneficiaries. If that process is confusing or complicated for you, having an estate planning attorney with your and your family’s best interests in mind can help you walk through the designation process.


Contact Wills & Wellness for a consultation. We treat your family like our family.

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