Photo of Eric R. Ebbert, CFP®, MBA, CEO Eric R. Ebbert, CFP®, MBA, CEO Feb 10, 2022

A beneficiary is a person you designate in your will or trust to receive property from your estate when you pass away. You can designate specific beneficiaries to inherit any property and assets that you own, including real estate, heirlooms, investments and financial accounts.

However, if for some reason the person you name as your beneficiary is unable to inherit your property, you can designate another person in their stead. This can happen if the original beneficiary has died, is unable to be found or chooses to decline their inheritance. Then it would fall to the contingent beneficiary to receive your assets.

Your contingent beneficiary can be anyone, including family and friends. You can also name a charitable organization as your contingent beneficiary.

Why should I choose a contingent beneficiary for my estate?

There are a number of reasons why choosing a contingent beneficiary is a wise move. In the case of unforeseen circumstances, it is always best to plan ahead to save a lot of time, money and legal headache. 

  • Probate — If you pass away and your primary beneficiary is unable to inherit your estate, then all your assets will have to go through probate court. Any debts that you owe will have to be paid before your assets are released from probate, which is a lengthy and expensive process. If you name a contingent beneficiary on assets such as a 401(k) or life insurance plan, then those assets will not be used to pay off your debts.
  • Estate tax — If you do not list a contingent beneficiary, there is a chance that any benefits that would go to your beneficiaries upon your death, such as a life insurance policy, will go to your estate. This could increase the amount of estate tax that will have to be paid.
  • Laws of succession — While succession laws differ from state to state, it falls to the state to determine where your assets go should your primary beneficiary be unable to inherit and no contingent beneficiary has been designated. This usually designates your surviving spouse first, and then any children and grandchildren you have second as the ones to inherit your estate. While this may be fine for some, it may not be for you.

How can I get started with estate planning?

If you are concerned about who will inherit your property and assets after your death, it is time to speak with someone about an estate plan

Talk to a ProVise CFP® professional about choosing the beneficiaries for your estate

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about planning for the future of your estate? Contact ProVise today to schedule a complimentary consultation.