Beneficiaries are people or organizations that will receive a deceased’s estate in the event of his or her death. A beneficiary is sometimes used as a synonym for an heir; however, an heir is usually someone who inherits property upon the death of their ancestor, while beneficiaries may inherit other types of assets. A beneficiary may be entitled to receive money, property, or an item such as a car or boat.
Read on to learn more about the types of beneficiaries, such as primary vs contingent beneficiary and their functions:
The primary beneficiary is the person who would receive the money if the insured person died. It can be a spouse, child, parent or other dependents. The primary beneficiary can be different from the secondary beneficiaries.
As per Ethos’ professionals, “The insurance company will look at the insured’s will and any legal documents that specify who should get what in case of death.” If there is no such document, they will use state law to determine who gets what assets.
Contingent beneficiaries are people who inherit the money in a will if the primary beneficiary does not survive the deceased. They are usually your spouse, children or other family members. For example, a common type of contingent beneficiary is a surviving spouse who would inherit everything in the will if he or she were to outlive the first spouse. If there is no primary beneficiary, then contingent beneficiaries can inherit the money.
Another example of a contingent beneficiary is an alternative trustee (a person who replaces your main trustee if they are unable to serve). If you name your daughter as a trustee, but she becomes incapacitated before her father passes away, then another trustee should be appointed to step in and take over on her behalf until such time as she recovers or dies. This second person could also be named as a successor trustee (which means that he or she takes over from both parents simultaneously).
The right of survivorship allows you to leave property such as a house or car to someone who owns that same item with you at your death (as joint tenants), even though they do not own it before then. This means that if one owner dies without leaving behind a will, his or her share goes directly to their surviving spouse or partner by default – but only if they’re married at the time of death.
Alternate contingent beneficiaries
An alternate contingent beneficiary is a person who will receive the funds in case the primary beneficiary dies before receiving the money. This is usually done by naming an alternate contingent beneficiary after the primary beneficiary, such as “in equal shares to my spouse and daughter” or “to John Doe and his heirs.”
The main takeaway from this article is that there are many types of beneficiaries, and each one serves a different function. By understanding the different types, it’ll be easier for you to decide which one is best for your situation.