Idaho Estate Planning What is a Contingent Beneficiary?

By Lane V. Erickson, Idaho Estate Planning Attorney

When we assist our clients in getting their estate planning done, we help them with everything that they should be considering as part of their estate. This often includes reviewing their life insurance policies, discussing their non-probate assets such as retirement accounts, annuity and investment accounts, pensions and going over other similar items. When we meet with a client and help them, our goal is to make sure that everything is completed.

The most common thing that needs to be done when you are completing an estate plan is making sure that you have named who your beneficiaries are. In other words, you need to identify who will receive your money, property, and other assets after you pass away.

The decision about who to name as your beneficiaries is often controlled by your particular circumstances. In other words, no two people are exactly the same when it comes to the assets they own, how their life is structured, the family members they have, and the family relationship dynamics that exist. Because of this, who you name as your beneficiaries might be vastly different than who someone else would name.

The purpose of today’s article is to educate you about the different kinds of beneficiaries that you can name as part of your estate plan. In helping people complete their estate plans, we found that this part is often overwhelming. The good news is that our free Estate Planning Questionnaire is the easiest way to start estate planning. We include a downloadable copy on our website to make it easy for our clients to use. The Questionnaire itself is also very simple. It includes sections allowing you to think about who you would want to list as the beneficiaries of your estate, particularly when it comes to certain assets that you own.

When the Questionnaire is done, we provide a free 30-minute consultation where we review the Questionnaire and information with our client and answer all their questions about estate planning. We also use this time to describe the options that are available to our clients based on what it is they want to accomplish including the options they have in naming beneficiaries.

When it comes to beneficiaries, one of the first things we like to discuss with our clients is the difference between contingent and primary beneficiaries. Simply put, a primary beneficiary is the first person that you want to receive a certain asset. For example, if you had a collectible car that you owned and you wanted it to go to a particular grandchild, then you would name that grandchild as the first or primary beneficiary of that collectible car. Then, you would state that if that grandchild passed away before you, that collectible car would go to someone else. The second person you list is the contingent beneficiary. In other words, their ability to receive the gift is contingent on the fact that the primary beneficiary will no longer receive it.

It is common in most estate plans created by a married couple for a spouse to say that everything they own will go to their spouse when they pass away. However, it is possible that your spouse may pass away before you. As a result, it is important that you name or list a contingent beneficiary, even if your plan is for everything to go to your spouse.

There are certain non-probate assets where it is important that you list both a primary and a contingent beneficiary. These non-probate assets include things such as life insurance, retirement accounts such as a 401k or an IRA, an annuity account, or a pension. Because all of these are controlled by contracts, the contract will have a place for you to list who your beneficiaries are.

This document is called a beneficiary designation form. When you fill out this form, there is a specific place for you to list who the primary beneficiary will be. Additionally, there are other sections that allow you to list one or more contingent beneficiaries and the percentage of your account that will go to those beneficiaries. You also have the ability at any time you choose to change who you have listed as your beneficiaries on these accounts. In other words, you can get a new beneficiary designation form and fill it out any time you want.

When you present the new beneficiary designation form to the account administrator, they are required to recognize the changes you made in the beneficiaries you named. When you die, the last beneficiary designation form you provided to the account administrator will be the one that controls who receives the money from those accounts. The account administrator has a contractual duty to pay to the beneficiaries you have identified the money that remains in your account.

The reason these are listed as non-probate assets is that your last will and testament will not control the distribution of these accounts. In other words, if you have filled out a beneficiary designation form as part of the contract and then in your last will and testament you have named a different beneficiary for that account, the contract will control and your Will does not.

When it comes to all other assets, your last will and testament controls who will be your beneficiaries. This would include regular bank accounts, as well as any type or kind of real estate that you own. It also includes all vehicles, any other tangible personal property, as well as any types of intangible assets that are part of your estate.

In your written last will and testament, you have the ability to list who your beneficiaries are. Again, usually you list the primary beneficiary first and state what it is they will receive. Then, usually there is language stating that if this person passes away before you, the next person you list will receive these assets.

Understanding who your beneficiaries are is an important step in completing your own estate plan. We have assisted numerous clients in the creation of their own customized estate plan, including naming beneficiaries on both probate and non-probate assets. We are confident that we can help you too! Contact us today for a free 30-minute consultation where we can answer your questions and help you determine who your beneficiaries will be.

Our team of Idaho lawyers can help you with any of your estate planning or probate needs. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho Estate Planning problems.