What is a 'Primary Beneficiary'

A primary beneficiary is an individual or organization who is first in line to receive benefits in a will, trust, retirement account, life insurance policy or annuity upon the account or trust holder's death. An individual can name multiple primary beneficiaries and stipulate how distributions would be allocated. 

For example, a parent with a $100,000 life insurance policy can name his son and daughter as the primary beneficiaries. However, he is free to decide how to distribute the assets which means the daughter can receive $60,000 and the son can get $40,000 upon the policy holder's death. Each can also receive equal 50% portions of $50,000 should the parent make that clear in the insurance policy.

BREAKING DOWN 'Primary Beneficiary'

A primary beneficiary is different from a contingent beneficiary, who is second in line to receive benefits. The contingent beneficiary receives an inheritance if he or she outlives the primary beneficiary. The contingent beneficiary can also receive benefits if the primary beneficiary refuses the inheritance or can't be located.  

Regardless, both primary and contingent beneficiaries must be legally competent to accept the gift. If a person dies while his or her named beneficiaries are still children, a court may appoint a legal guardian to manage the inheritance until the child reaches an age of maturity as defined by state law. In the case of a will or trust, an individual can set specific rules as to how distributions are made toward beneficiaries. For example, the trust creator or grantor can stipulate that their children as named beneficiaries can acquire control of the trust's assets and income only after they graduate college or marry. 

The Importance of Updating Primary Beneficiaries 

Named beneficiaries of insurance policies and accounts like 401(k)s and Individual Retirement Accounts (IRA)s take stance over those designated in a will. This means assets in these accounts will flow to the named beneficiary in the account policy even if a will suggests otherwise. 

An IRA can name a spouse as the primary beneficiary, while the same person's will may name the children as primary beneficiaries. The spouse will receive the proceeds of the IRA and the children will receive the assets for which they are named primary beneficiaries in the will—but nothing from the IRA. 

Except for an irrevocable trust, most entities that transfer wealth can be updated by changing primary and contingent beneficiaries. 

And even though naming primary and contingent beneficiaries is often optional for accounts like IRAs, naming them can help assets bypass the often costly process of probate that an individual's heirs may go through to secure their benefits. Failure to name beneficiaries may also mean assets fail to keep generating returns or income. For example, several retirement accounts allow spousal beneficiaries to roll over their partner's retirement assets into their own IRAs and delay making required minimum distributions (RMD) until after they turn 70. Non-spousal beneficiaries are typically required to start taking RMDs as soon as the original account holder dies, which means these assets won't benefit from compound interest and tax deferred growth.


  1. Named Beneficiary

    The term refers to any beneficiary named in a will, a trust, ...
  2. Secondary Beneficiary

    A secondary beneficiary is a person or entity that inherits assets ...
  3. Revocable Beneficiary

    A revocable beneficiary can expect but is not guaranteed payouts ...
  4. Beneficiary Clause

    Beneficiary clause permits an investment vehicle policy owner ...
  5. Beneficiary Of Trust

    A beneficiary of trust is the individual or group of people who ...
  6. See-Through Trust

    A see-through trust is treated as the beneficiary of an individual ...
Related Articles
  1. Managing Wealth

    Why Your Will Should Name Designated Beneficiaries

    Find out how to make the tough decisions when it comes to choosing beneficiaries for your will.
  2. Retirement

    What You Should Know About IRA Beneficiaries: Part 2

    Here's how IRAs, and the beneficiaries you name, work with wills and trusts.
  3. Retirement

    3 Deadlines For Retirement Plan Beneficiaries

    To take full advantage of new RMD regulations, beneficiaries need to take action before important deadlines.
  4. Retirement

    Why Your Estate Shouldn't Be Your IRA Beneficiary

    Here are five reasons why you should not name your estate as your IRA beneficiary.
  5. Financial Advisor

    Top Estate Planning Tips for 401(k)s and IRAs

    Here's how to avoid estate planning pitfalls when it comes to leaving IRA and 401(k) assets to heirs.
  6. Retirement

    September 30: A Key Date For Retirement Plan Beneficiaries

    Unless certain action is taken by this date, distribution rules can put the youngest inheritor at a disadvantage.
  7. Retirement

    3 Ways People Accidentally Disinherit Loved Ones

    Proper beneficiary planning can ensure you don't accidentally disinherit loved ones.
  8. Financial Advisor

    Avoid This Life Insurance Policy Pitfall

    Life insurance policies need to be reviewed regularly to make sure that the beneficiary you chose some time ago is still the right choice today.
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center