A contingent beneficiary is an important estate planning concept that proactively arranges for assets to pass to a designated beneficiary in the event the primary beneficiary or beneficiaries are no longer available to accept the inheritance. This concept applies to all types of life insurance policies and retirement accounts, including annuities, individual retirement accounts (IRAs) and 401k accounts.

While the primary beneficiary has first right to the proceeds in the event of the insured's death, the contingent beneficiary is named in order to be in charge of the assets if the primary beneficiary passes away or is unavailable to claim them. This concept is especially important when the primary beneficiary is a minor child or other person who can not legally accept the asset. In those cases, a guardian or trustee must be appointed to accept the asset on the child's behalf, and the contingent beneficiary ensures that someone is always in control of the asset even if an unexpected death or disappearance occurs.

When naming a contingent beneficiary, keep in mind that beneficiary designations on life insurance policies and retirement accounts must be kept up-to-date at all times. This is an especially easy task when the initial or primary beneficiary is still a valid choice, but it’s always important to examine the beneficiary designation at least once a year. To save the trouble of having to include someone as your contingent beneficiary, you can also name a trust as the beneficiary of your retirement account or life insurance policy. This complex arrangement will require the assistance of an estate planning attorney, but it also provides guarantees that the assets will go to the right beneficiaries and will not be subject to taxes and probate.

Overall, a contingent beneficiary is an important aspect of any family’s estate planning, and should be chosen carefully. An experienced estate planning attorney can help ensure the process is done properly and that the right people are selected for the job.