When it comes to estate planning, beneficiary designation paperwork plays an important role. When you do things correctly, you make things easy for yourself and for your loved ones.
Mistakes in this area, on the other hand, could result in headaches and extra fees. The proper naming of a contingent beneficiary will help you manage your estate more efficiently.
The purpose of a contingent beneficiary
Information from Bankrate defines a contingent beneficiary as a person (or organization) who receives death benefits if a primary beneficiary has already passed away. While many people name a primary beneficiary for life insurance policies and certain retirement benefits, they sometimes fail to take the extra step of naming a contingent beneficiary.
This becomes important in situations where the primary beneficiary has passed on, cannot be located or refuses the benefits. The named contingent beneficiary then receives the applicable benefits without the need for additional legal proceedings.
As with the primary beneficiary, you do not need to name a person. A beneficiary designation can include an organization or a charity.
The necessity of a contingent beneficiary
Depending upon your situation, naming a contingent beneficiary could take on real significance. This usually involves cases where you name only one primary beneficiary. If that person or organization no longer exists, the entity named as a contingency stands a realistic chance of receiving benefits.
If your policy names several primary beneficiaries, the likelihood of the benefits going to a beneficiary further down the line seems less likely. Smart decisions with estate planning can result in your wishes being carried out as you intended.