What is contingent beneficiary?

A contingent beneficiary is the individual or entity designated to receive assets from a financial account or policy (like a life insurance policy or a retirement account) if the primary beneficiary is deceased, unable to be located, or refuses the inheritance.

Think of it as a backup plan. If the primary beneficiary can't or won't receive the assets, the contingent beneficiary steps in. It's crucial to name a contingent beneficiary to avoid the assets going through probate, which can be a lengthy and costly legal process.

Without a designated contingent beneficiary, the assets typically become part of the deceased's estate and are distributed according to their will or, if there's no will, according to state law. This process can take a significant amount of time and can result in unintended consequences.

Choosing a contingent beneficiary requires careful consideration. You should consider factors like their age, financial stability, and your relationship with them. It's also a good idea to review your beneficiary designations periodically to ensure they still align with your wishes.