What is a Contingent Beneficiary?
Contingent Beneficiary of a life insurance policy is entitled to receive the policy proceeds on the death of the insured if the primary beneficiary dies before; or the beneficiary who receives the remaining payments if the primary beneficiary dies before receiving the guaranteed number of payments. It is also known as Secondary Beneficiary.
Understanding Contingent Beneficiary
A contingent beneficiary is the second on the list to receive an asset after the principal beneficiary. The specified possessions will only pass to this individual if the main recipient does not. If the primary beneficiary can't be contacted, denies the offer isn't lawfully willing to handle it, or passes before you do, the funds will be handed to the contingent beneficiary.
Common Contingent Beneficiaries
When deciding who can really get your possessions, you may want to make your partner the primary beneficiary of the trust or insurance. If your partner dies before you, your grown children could each take half of your inheritance as contingent beneficiaries.
Any person, group, foundation, or organization can be named as the contingent beneficiary of a value of assets. The person who is chosen must be of adult age or have the lawful ability to accept the possessions. If the document contains a child, a formal guardian may be named to manage the property till the minor reaches age of majority.
When Contingent Beneficiaries Acquires Funds
When the primary beneficiary dies, runs away, or is unwilling to collect the funds when the account is available, a contingent beneficiary can obtain insurance benefits, an estate, or pension money. Another criterion imposed by the account owner is that the recipient must match the profile before the funds are distributed.
What Happens with No Contingent Beneficiary?
If the primary beneficiary is close to death, cannot be located, or denies the assets, and there is no contingent beneficiary, the resource becomes part of the common property portfolio and must be probated. If you've got a will, the assets will belong to the people you name in it. If you die without a will, the resource would be distributed to the heirs according to the government's court laws.
Practical Example
Javi took life insurance after completing his graduation. When he was going through the proceedings, he was required to name a contingent beneficiary, which means the person or organization that will receive the payments if Javi is unable to do so. So he named his wife as the contingent beneficiary and if his wife dies before him, he mentioned his favorite charitable organization as the contingent beneficiary.
In Sentences
- In the case of life insurance, your contingent beneficiary is the individual who will collect the insurance coverage if you are unable to do so.