Definition: What is a Contingent Beneficiary?
For retirement savings plans as well as life insurance policies, individuals are required to select a primary beneficiary who receives the funds within the account upon the account holder’s death.
In addition to designating the primary beneficiary, the account owner may also select a contingent beneficiary.
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Why Select a Contingent Beneficiary?
This selected individual will be the recipient of the account’s funds in a wide range of events including if the primary beneficiary:
- Passes away at the same time as the account owner
- Is not legally able to accept the funds when the account owner passes away (i.e., a minor)
- Is medically incapacitated
Selecting a contingent beneficiary in addition to a primary beneficiary creates a more efficient plan for the funds within the account upon the owner’s death.
Why it is Extra Important to Select Contingent Beneficiaries
Essentially, a contingent beneficiary can be thought of the second in line to receive proceeds of an account once the account owner passes.
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