We’re going to talk today around contingent beneficiary. So what is a contingent beneficiary? So when you go get it, a will done and or a trust done, the attorney won’t let you out the door without naming what’s called a contingent beneficiary. So you’re going to say most typical, let’s talk about just married couples, say, “look, everything off to my spouse first, if something happens to me. And then if something happens to the two of us, when something happens to the two of us, I want my children and or my grandchildren. By the way, add in my mom or my nieces and nephews.”
So that’s a beneficiary. And there’s a series of beneficiaries. So the design of a estate plan, trusts and wills, are designed in such a way as to not just benefit the first layer of beneficiaries, your surviving spouse and your children, maybe some grandchildren. There’s also what’s called contingent beneficiaries. And that’s the idea of the document or the plan will never run out of a beneficiary. So everyone gets on the Titanic one step at a time, right? So this is that.
And in the 30 years I’ve been doing estate planning, thank God, no family has all gone down in the accident together. But if that’s the case, your estate plan runs out of direct beneficiaries. Mom and dad go, and we’re having smaller and smaller families these days, right? Where we don’t have 10, 12 kids anymore. We typically have one or two. That’s the average in America now. So if the mom and dad and both kids go down in the accident and there’s no grandkids and no other children, who receives the inheritance?
The default in most states is something called heirs at law. And you can look up in your own state statute, what does heirs at law in California or Washington or Maryland or Delaware is. And that means typically that it says, if it’s a married couple, 50 % of the assets will go to one party’s family and 50 % of the assets will go to the other party’s family.
How do they define that? They’ll go first finding your parents. That means it’ll be divided between your two parents. If you only have a single parent alive, just mom is there, then mom will receive your 50%. If mom and dad have predeceased you, the laws say for the most part, they’ll go find your siblings, your sisters and brothers. And if they aren’t around, they’ll go find your nieces and nephews.
And if there’s nobody in that direct lineal descendancy, they’ll march one step up and they’ll go find your grandparents. And obviously they’ve predeceased you most of the time, then they’ll go find your aunts and uncles, et cetera, et So, and your cousins. This is how sometimes you hear about that sixth cousin receives anything. So if you have family members who you think, “No, no, no, no, that’s not good. I’m not sure I want my brother Tom to have anything.” Then this is where you and I, well, our advisors see clients taking a step towards most of the time for the first time in their life, charitable planning.
They’ll add, they’ll say, “Well, I actually come from a really small family. I’m an only child. My parents are actually doing really well. They actually don’t need this money.” Here’s this opportunity where I see people funding scholarships at their alma mater. I see the church or the synagogues taking a step into the estate plan. I see the American Cancer Society or the SPCA. Those nonprofits are usually, if people take just a moment to examine, who do they like better than all these distant relatives? Or maybe they come from those small families where distant relatives are just not able or those aren’t just your choices.
So what’s a contingent beneficiary? Contingent beneficiary is your immediate beneficiaries, spouse, children, grandchildren, the most obvious heirs, maybe your mom and dad are gone. Don’t survive you. You’re the last survivor. And now where does the estate go? And this is where most people, when they take a moment to think about it, really start thinking about not only extended family, but certainly friends. Friends step in here, close friends and advisors.
And then churches and hospitals and scholarships and so when you’re filling out your estate plan, it isn’t just the first line of beneficiaries. There’s this contingent beneficiary. So give that some thought and family is great, but most of the time we move away from family and marry others, right? So if there’s somebody else or something else you love more than your sixth removed cousin, think about adding your alma mater, your nonprofit desires.
Have a great day. Call, email, or text us. We’re here to help.
Video Summary
When creating a will or trust, most people focus on naming their primary beneficiaries—like a spouse or children. But what happens if those individuals are no longer able to inherit? That’s where contingent beneficiaries come in.
Contingent beneficiaries are your backup plan. They step in to receive your assets if your primary beneficiaries predecease you or are otherwise disqualified. Without them, your estate could default to your “heirs at law”—a state-defined list of distant relatives who may not reflect your personal wishes.
By naming contingent beneficiaries—such as close friends, extended family, or charitable organizations—you maintain control over where your assets go, even in unforeseen situations.
Review your estate plan regularly to ensure all your bases are covered. A well-thought-out plan can protect your legacy and prevent unintended outcomes.
Don’t leave it to chance—make sure your contingent beneficiaries are in place.
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