The Ultimate Guide for a Contingent Beneficiary

Contingent beneficiaries, remainder beneficiaries, remaindermen, and secondary beneficiaries have rights to estate or trust assets, but those rights are contingent upon the inability to distribute the assets to the primary beneficiary. Here’s a guide.

What is a contingent beneficiary?

A contingent beneficiary – sometimes called a remainder beneficiary, a remainderman, or a secondary beneficiary, is an individual or entity who is scheduled to receive an estate or trust distribution, after the death of the Trustor, but only if the primary beneficiary has passed away, or is unable or unwilling to accept the distribution.

For example, if a grandparent passes away and leaves their entire estate to their surviving child, but that child has also passed away, then that child’s child (the grandparent’s grandchild) would be the contingent beneficiary. This may be dictated by the will or trust, or simply by the state’s probate code and laws of intestate succession.

Is a secondary beneficiary the same as a contingent beneficiary?

Yes, for the most part. A secondary beneficiary is an individual named in a will or trust, who is earmarked to receive a distribution if the primary beneficiary is not able to accept the distribution. In some colloquial conversations, the “secondary” beneficiary may refer to a secondary beneficiary whose name is in the will or trust, while the “contingent” beneficiary is the individual next in line to receive the distribution due to intestate succession laws, even though they aren’t specifically named in the trust.

Contingent vs primary beneficiary

A primary beneficiary is the first individual or entity designated to receive assets from a will, trust, or life insurance policy. This person is explicitly named in the estate planning documents or, in cases of intestacy (when there is no will), determined by state law. For example, if a spouse passes away, their surviving spouse is typically the primary beneficiary, either by being named in a will or trust or as dictated by state probate laws.

A contingent beneficiary, sometimes referred to as a secondary beneficiary, serves as a backup if the primary beneficiary cannot or will not accept the inheritance. Various circumstances can trigger the contingent beneficiary’s rights, including:

• The primary beneficiary predeceases the decedent – If the primary beneficiary dies before the asset owner and there is no contingent beneficiary named, the asset may go to the decedent’s estate and be distributed according to intestacy laws.
• The primary beneficiary disclaims the inheritance – If the primary beneficiary refuses the inheritance (perhaps due to tax concerns or personal reasons), the contingent beneficiary will then receive the assets.
• The primary beneficiary is unable to inherit – This can happen if the primary beneficiary is a minor (without a trust or guardian arrangement) or if they are legally disqualified, such as in cases of fraud or elder abuse.
• The estate plan includes specific conditions – Some estate plans set conditions for beneficiaries, such as requiring them to reach a certain age or fulfill specific obligations before inheriting. If the primary beneficiary does not meet these conditions, the contingent beneficiary may step in.

Scenario Example

Imagine a woman, Sarah, who names her husband, Mark, as the primary beneficiary of her life insurance policy and her sister, Emily, as the contingent beneficiary.

• If Sarah passes away and Mark is still alive, he will receive the life insurance payout.
• If Mark passes away before Sarah and she does not update her beneficiary designation, Emily, as the contingent beneficiary, would receive the payout instead.
• If neither Mark nor Emily is alive at the time of Sarah’s passing, and no additional contingencies were set, the life insurance proceeds might be paid to Sarah’s estate and distributed through probate, potentially leading to delays and unintended recipients.

By naming both primary and contingent beneficiaries, estate holders can prevent assets from being unnecessarily tied up in probate and ensure their wishes are honored even if unexpected events occur.

What is an intended beneficiary?

An intended beneficiary is simply any of the persons named in a will or trust. For example, a family trust names the spouse and three children of the decedent the intended beneficiaries. The trust may also name secondary beneficiaries, if the spouse or any of the children also pass away.

Is a revocable beneficiary the same as contingent beneficiary?

No. A revocable beneficiary is an individual who is “not guaranteed” a trust distribution, meaning the Trustor can change their mind about giving them a distribution. Whereas, in an irrevocable trust, the individuals named in the trust are “guaranteed” their distributions pursuant to the trust. And the trust allocations and distributions cannot be changed. An exception to this general rule may exist where the trust has a power of appointment, allowing assets to be directed to someone other than the originally stated beneficiaries.

For example, a Trustor may name a caregiver as a revocable beneficiary. Why? Well, they may appreciate the caregiver’s time and efforts, but lack a solid relationship with the caregiver. As such, if the caregiver is discovered to be unreliable over time, then the Trustor may repeal the intended distribution to that caregiver.

What is a tertiary beneficiary?

Tertiary means “third”, so tertiary beneficiary refers to the beneficiary third in line to receive an inheritance or estate distribution, if the primary and secondary beneficiaries are unable to receive theirs.

Can a beneficiary contest a will or trust?

Yes. A beneficiary or heir has the right to contest a will or trust, if they feel they are not receiving their rightful inheritance distribution. Generally, a beneficiary seeking a larger distribution will retain a probate litigation lawyer or trust litigation attorney to represent them in the matter.

Why would a beneficiary contest a will or trust?

Generally, a beneficiary will contest a will or trust in order to get a larger inheritance. Common reasons for beneficiaries to contest a will or trust include:

Medical Bills

At RMO, we frequently work with clients who paid the bulk of their deceased parent’s medical bills, sometimes totalling $100,000 or more. We work with these clients to get the medical bills paid by the estate BEFORE the estate or trust assets are distributed. This ensures that the bills are paid fairly, and all beneficiaries accept equal burden to pay the medical bills, before receiving their inheritance.

Undue Influence

It’s quite common to discover that the decedent changed their will or trust only a few weeks or months before passing away. Sometimes they made these changes because of undue influence applied by an abusive spouse, caregiver, or trusted family member. If so, then the beneficiaries impacted by the changes can contest the will or trust to regain their rightful inheritance.

Incapacity

It’s similarly common that when a decedent suddenly changes their will or trust shortly before death that they were suffering from some ailment or condition that left them without sufficient legal capacity to make those changes. If this is the case, then the affected beneficiary or heir will be able to contest the will or trust to overturn the illegitimate document.

When should I contact a probate litigation lawyer?

Contact a probate litigation lawyer the moment you suspect an unfair estate distribution, undue influence, incapacity, or financial elder abuse. The single biggest regret we have seen is family members who have waited, not wanting to cause family disharmony, only to be left in a worse position because of the delay. What’s more, the longer you wait to pursue claims, the harder it is to recover lost assets and distributions.

Do I need a probate lawyer near me?

We recommend finding an experienced probate lawyer familiar with the county probate court in the county where the estate is located. For example, if the beneficiary lives in San Diego, yet the decedent lived in Los Angeles, we recommend working with a probate lawyer in Los Angeles. A Los Angeles trust lawyer will generally be more familiar with the Los Angeles Superior Court Probate Division, versus an out of state attorney.