A contingent beneficiary is the alternative beneficiary, designated by the account holder, who is set to receive the proceeds or benefits of a financial account, only if the primary beneficiary is not able to accept the benefits at time of payment. The financial account can be in the form of insurance, retirement, or inheritance. When the primary beneficiary accepts and receives the benefits of a financial account, it generally disqualifies the contingent beneficiary to receive any benefits, as the primary is present at the time of payment.
The holder of a financial account may elect any individual, organization, charity, or trust as the contingent beneficiary. The elected individual should be of legal age or have the legal capacity for accepting the assets. In the event a minor is listed on the contract, a legal guardian should be appointed to oversee the assets until the minor reaches the legal age.
A contingent beneficiary can receive insurance proceeds, inheritance, or retirement assets when the primary beneficiary is deceased, missing, or refuses to claim at the time the account becomes due. There are may also be other predetermined conditions set by the account holder, in which the beneficiary must meet before the proceeds are released. Examples include the following conditions: getting married, graduating from college, or even attempting to avoid legal troubles. There are laws mandated for certain asset transfers that includes the age of eligibility of the primary beneficiary.
As an alternate recipient of financial proceeds, a contingent beneficiary has the right to enforce the provisions included in the contract. If a person or third party, who controls the account, refuses to implement the agreement, then a lawsuit may be filed by the concerned parties. In extreme cases, the contingent beneficiary can have a reasonable claim. For example, if the primary beneficiary murders the account holder in an attempt to inherit assets, the contingent beneficiary would have a reasonable claim.
Adding beneficiaries or contingent beneficiaries to financial accounts, especially in regards to insurance policies and inheritance, is generally recommended for account holders. This avoids unnecessary probate expenses or delays for the heirs to receive the proceeds. Even if primary beneficiaries are listed, it is always important to have a back-up plan just in case the primaries are not be able to meet the predetermined conditions. Not naming or electing any beneficiaries will cause all assets or wealth left by the deceased to go to his estate, which may severely limit the potential benefits that heirs may receive.