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'

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