What is a 'Secondary Beneficiary'

A secondary beneficiary is a person or entity that inherits assets under a will, trust or insurance policy if the primary beneficiary dies before the grantor. A secondary beneficiary would also be considered a "contingent beneficiary".

A secondary or contingent beneficiary inherits assets only if certain conditions are met, such as the death of the primary beneficiary or their decision to disown the assets to which they are entitled. If a primary beneficiary cannot be found at the time of the grantor’s death, this another condition under which assets could pass to the secondary beneficiary.

Secondary beneficiaries may also be named for a retirement account or other vehicles. For example, when creating an IRA, selecting to contribute to an employer-sponsored 401(k), insurance policy, 529 college savings plan, health savings account (HSA), or trust, the maker must name the person or people he or she wishes to receive the assets in the event of death or incapacitation. In these scenarios it is often possible to name more than one primary or contingent beneficiary, allocating percentages among those selected.

Secondary Beneficiaries and The Creation and Execution of Wills

A will is a legally enforceable declaration that details how a person will distribute their assets after death. Although its format can vary, most follow a fairly uniform layout, starting with a statement that the writer is of legal age and making the will of their own sound volition. The will also names an executor and guardian for any minor children, and names the beneficiary(ies). For example, a will could itemize bank accounts and divvy up property among several individuals. Assets that are jointly owned are also split up accordingly. In a will it is critical to be as clear and specific as possible to avoid legal challenges and related expenses.

Most states require that the will have witnesses. In Iowa, for example, in 2018 a valid will must have two competent witnesses, at least 16 years of age. These individuals must sign the will in the presence of both the maker of the will and each other. In addition the will maker must verbally tell the witnesses that it is his or her will. The will maker must also be at least 18 years of age or married.

In some cases it’s possible for a will to be self-proved. This can happen if, at the time it is made, both the maker and witnesses sign affidavits that describe how the will was executed. This eliminates the need for witnesses. In all cases, it is recommended to have the assistance of an attorney to be sure that the will is valid and its instructions carried out as desired.

BREAKING DOWN 'Secondary Beneficiary'

  1. Alternate Beneficiary

    In a will, an alternate beneficiary is usually named in case ...
  2. Named Beneficiary

    The term refers to any beneficiary named in a will, a trust, ...
  3. Beneficiary Clause

    A beneficiary clause is a provision in a life insurance policy ...
  4. Beneficiary Of Trust

    A beneficiary of trust is the individual or group of people who ...
  5. Beneficial Interest

    A beneficiary interest refers to an individual's right to benefit ...
  6. Life Estate

    A type of estate that only lasts for the lifetime of the beneficiary. ...
Related Articles
  1. Retirement

    Breaking Down IRA Beneficiaries: Part 1

    It's important to give serious consideration to your IRA beneficiary designations.
  2. 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.
  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

    What You Should Know About IRA Beneficiaries: Part 2

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

    Designating a trust as retirement beneficiary

    Designating a trust as your IRA beneficiary can be beneficial, but it requires proper planning to avoid problems.
  6. Managing Wealth

    Encouraging Good Habits With An Incentive Trust

    Money can be a powerful motivator - why not use it to teach your heirs positive lessons?
  1. What does U.S. law say about contingent beneficiaries?

    Learn about regulations the United States has on the naming of contingent beneficiaries, the types of contingencies that ... Read Answer >>
Hot Definitions
  1. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  3. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  4. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  5. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  6. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
Trading Center