A Life Insurance Policys Contingent Benificiary Is The Beneficiary Assigned After The First

Assigning more than one beneficiary is helpful in making sure that the proceeds from it are claimed. Having multiple beneficiaries helps if an accident occurs where multiple people die in rapid succession.

A life insurance policy contingent beneficiary is the beneficiary listed to receive the policy’s proceeds after a primary beneficiary. You can list multiple people as the primary beneficiary with a split percentage payout to each. If the primary beneficiary dies or refuses the funds then they would go to the contingent beneficiary.

Life insurance proceeds are typically tax-free when distributed after someone passes away. However, if the beneficiaries listed die, cant be located, or refuse then the proceeds go to the estate and must go through probate, which can be costly and time-consuming.

You can list four basic entities as a beneficiary: nonprofit organizations, trusts, people, and estates. If you want to really make sure the proceeds go to the beneficiary then naming any but a person is the safest bet. Also, having a will wrote will help as well.

When designating more than one beneficiary the percentage must add up to 100%. So naming twelve people can get tricky as the percentage will be odd for example. Often beneficiaries are listed as the spouse first, with kids listed equally afterward.

Some odd situations arise where people want to leave their fortunes in part or whole to a pet. Strictly speaking, this can’t be done but you instead assign a guardian or caretaker for the pet. Or you could set up a trust for the pet. This is highly unusual but not unheard of.

Something similar happens if a minor is designated as a beneficiary. A caretaker or guardian would need to be named until the child turned 18 or 21. At which point they would then be in full control of their inheritance.

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How is the death benefit paid to a contingent beneficiary

First off there has to be an attempt to locate the primary beneficiaries, if they are not located or found to have passed away then the contingents are found. There may be multiple primaries to look for, however.

When the primary beneficiaries cannot be paid out for whatever reason, then a life insurance contingent beneficiary is sought out. They are often paid just the same as if they were the primary beneficiary. The terms of payout are defined in the contract, which is usually set forth in some form of a percentage value. So if all primaries are not paid, and there’s only one contingent then that person would get 100%.

The only stipulations added to a beneficiary receiving death benefit proceeds is if a will were in place and it mentioned some. The writer of the will may put forth something like completing college, turning a certain age and getting percent at each age level, or other criteria.

Other benefits of a contingent beneficiary

We’ve all heard horror stories of families being really petty when a parent passes away and fighting every decision others suggest. Listing beneficiaries and having a will to clarify the distribution of one’s assets to the rest of the family will avoid a lot of legal troubles as well as infighting.

Updating beneficiaries

As with life insurance, the most common time to update your listed beneficiaries is when a life event occurs. Life events can include moving, change of career or income, death of family members, the birth of a child, and obviously marriage or divorce.

How to update beneficiaries

Updating your beneficiaries is as simple as filling out a form, signing it, and sending it to the life insurance company you use. When listing a beneficiary it’s a really good idea to have the most accurate information possible, which may include social security number, phone number, address, birth date, and possibly other information depending on the insurance carrier.

Death proceeds that go to an estate

When a death benefit is paid to someone’s estate it goes through the probate process. This means that the death benefit becomes part of the estate so if there are creditors that have a legal claim they can then attempt to get part of it. In addition, money going towards an estate is subject to estate taxes which will only reduce the amount available even more.

If there are heirs then it could be months if not years before anything is distributed to them. This is why simply naming a contingent beneficiary can avoid a lot of financial hardship.

For personalized information regarding your situation and what would fit you best contact us today.