Skip to content
SuperMoney logo
SuperMoney logo

Contingent Beneficiary vs. Primary Beneficiary: Definitions and Examples

Last updated 03/19/2024 by

Emily Africa

Edited by

Fact checked by

In various circumstances, such as when signing up for a life insurance policy, setting up a retirement account, or establishing a trust, you will name one or more beneficiaries. All the conditions in the policy, trust, or account must be legally documented. When all these conditions are met, the income, proceeds, or benefits will pass to your beneficiaries. For example, in a will, you may have both primary beneficiaries and contingent beneficiaries. If living and both able and willing to receive the assets involved, the primary beneficiaries will divide the assets among them as you’ve designated. If no primary beneficiaries can receive the assets, those assets pass to the contingent beneficiaries.
As you manage your finances, you may wonder what happens to your assets in the event of your death. One way to ensure your assets go where you wish is to name contingent and primary beneficiaries. You can list contingent and primary beneficiaries on various financial accounts, such as retirement accounts, life insurance contracts, and trust documents. Continue reading to learn the difference between these beneficiaries, situations where you can name beneficiaries, and the pros and cons of naming beneficiaries.

Understanding the types of beneficiaries

As you plan your estate and accounts, you will most likely be asked to name primary and contingent beneficiaries. Let’s take a closer look at the difference between the two.
  • Primary beneficiary: The primary beneficiary is the person or entity who will have the first claim to your assets after your death. You can think of this person as “first in line” to receive the funds from, for example, your retirement or life insurance accounts.
  • Contingent beneficiary: The contingent beneficiary is, therefore, the person or entity who is “second in line” to receive your assets after your death. The contingent beneficiary will only receive the funds if the primary beneficiary passes away, cannot be located, or doesn’t accept the transfer.

Compare Life Insurance Providers

Compare multiple vetted providers. Discover your best option.
Compare Options

How beneficiaries work

If you were to die, your primary beneficiary would receive the funds from the designated accounts. If the primary beneficiary could not accept the funds, the contingent beneficiary would receive them.

Examples of beneficiaries receiving funds

  1. You have a spouse and a child. You name your spouse as your primary beneficiary, but your spouse unexpectedly passes away. Since you already listed your child as the contingent beneficiary, when you pass away shortly after your spouse, your child receives the assets from your estate.
  2. You have a spouse and two children. You decide to list your spouse and your children as your primary beneficiaries and decide that your spouse will receive 50% of your assets and each of your children 25%. Even if your spouse were to die, your children would still be primary beneficiaries and each receive 50%. The same logic applies to contingent beneficiaries.

Does your contingent beneficiary affect your primary beneficiary?

Naming a contingent beneficiary does not take away from the primary beneficiary’s inheritance. A primary beneficiary who is alive and willing and able to accept the inheritance will receive the full amount regardless of how many contingent beneficiaries you name. A contingent beneficiary sometimes acts as a safeguard against your assets going to probate, the legal process of distributing a deceased person’s assets when there is no legal will in place.

Special case contingencies

You can also create contingencies that prevent an inheritance without certain qualifications being met by the inheritor. For example, you could list your child as the contingent beneficiary on your IRA account but establish that your son or daughter will only inherit the money after completing college.

How to choose beneficiaries

Beneficiaries can be people, organizations, estates, charities, or trusts. Most often, beneficiaries are immediate family members or close friends. If you choose to name a minor as a beneficiary, you must name a legal guardian to accept the money on the minor’s behalf until the latter comes of age. A minor is someone under a certain age defined by law, usually 18.
Legal adulthood, or the “age of majority,” varies among the states. Age 18 is the most common. In two states, Alabama and Nebraska, the age of majority is 19. In Mississippi, it’s 21. Related laws that vary state-to-state are whether minors can file lawsuits, consent to medical procedures or treatments, or be legally “emancipated.”
You will also need to name legal guardians for beneficiaries who are mentally incapacitated and unable to manage their own affairs. Appoint a legal guardian ahead of time to ensure someone you trust manages your finances and to avoid the account reverting to your probate estate. If you do not appoint a legal guardian, the court will appoint one.

Choose with care

You should choose your beneficiaries carefully. Choose the people you want to be in charge of your assets. If you would rather name a charity or trust instead of a person, you can legally do that, as well. But there might be additional tax implications. Jackie Chan decided to do just that, leaving his inheritance to charity instead of his son.
An example of choosing a charity as your beneficiary. You are married without children. You name your spouse as your primary beneficiary and your favorite charity as your contingent beneficiary. Should your wife be unavailable, unable, or unwilling to receive your assets when you die, your favorite charity will receive and use them as it sees fit.
To prepare for the unlikely scenario where a tragedy affects all your chosen beneficiaries, you can name a remote contingent beneficiary. This person or entity will receive your assets if none of your beneficiaries outlive you. If you want to make absolutely certain that your assets will not go to the state, setting up this final safeguard is a smart decision.

Can I change beneficiaries?

It depends. In most cases, you can change the beneficiaries of your life insurance and IRA as often as you want. However, an irrevocable trust cannot be modified without the permission of the beneficiaries. However, as long as you are alive, beneficiaries do not have any legal right to your assets. You also do not always have to notify your selections that they are beneficiaries. With some exceptions, such as irrevocable trusts, you should feel free to adjust and change beneficiaries as often as you think appropriate.

Changing retirement account beneficiaries

Retirement accounts, like 401(k)s and IRAs, make it easy to change beneficiaries. In these cases, you often only need to fill out an online document. However, making changes to the beneficiaries named on your retirement accounts might have tax consequences, especially if the change involves a spouse. Consulting a legal or tax professional could help ensure your proposed changes are most advantageous for you and your estate.

Changing life insurance and trust beneficiaries

For some life insurance accounts and trusts, such as irrevocable life insurance trusts and irrevocable trusts in general, you may not be able to change the beneficiary. In these situations, it is impossible for you to choose a new beneficiary unless the current beneficiary approves the change. The beneficiary may also be unable to refuse the inheritance at the time of payout. You should consult your insurance policy to better understand the terms applicable to your beneficiary and to see if changes are possible.

Keeping your beneficiaries up to date

Regardless of whether you want to change your beneficiaries, you should occasionally review your estate documents to ensure that they reflect your wishes. You should review your primary and contingent beneficiaries any time you or loved ones experience major life events, such as births, deaths, marriages, and divorces. Updating your beneficiaries at these critical life moments will protect your assets from going to probate.

What is probate?

Probate is a general term for the administration of a deceased person’s estate, whether or not there’s a will.
Provided the deceased has left a will that is valid and authentic, the probate process can be simple. For example, in a case where the will is thorough and easily authenticated, probate involves collecting the deceased assets, paying off liabilities, and distributing the remaining amount to beneficiaries.
Probate can be expensive….The issue is that there is no way one can predict what a probate might cost. National estate planning expert and author Henry Abts III, in his book The Living Trust, writes that you can expect five percent to fifteen percent of your estate to be gone after the probate process is completed.” — Randall McKee, Registered Financial Consultant, in Passing It On
However, if the will does not exist or is missing key information, such as updated beneficiaries, the probate process can be lengthy and expensive. Ultimately, this process will reduce the amount of inheritance you leave to your heirs. Naming and updating beneficiaries are simple steps you can take to avoid a long probate and the unnecessary costs associated with it.
Accounts will usually go into probate if you fail to name primary and contingent beneficiaries.

Pros and cons of naming a contingent beneficiary

Here is a list of the benefits and drawbacks to consider.
  • Avoid probate: Naming a contingent beneficiary is an important safeguard in ensuring that your estate does not go into probate. Probate, which can be a lengthy process, can also be costly, reducing the inheritance of your heirs.
  • Ability to change at major life events: Unless your beneficiary is irrevocable (as with some life insurance policies), you can change your contingent beneficiaries as major life events happen. You do not need to notify your beneficiaries that their names are on your account or that you have removed their names. Check your insurance policy to determine if your beneficiary is irrevocable.
  • Can be problematic if not updated: If you do not notify your beneficiaries of their status on your account, family drama can ensue after your death. It is wise to update your beneficiaries and let them know they are named or removed so that they can collect the inheritance (or, if they’ve been removed, know not to try) at the time of your death.
  • A beneficiary does not accept inheritance: Some named beneficiaries might not want to accept an inheritance. For example, they might fear that accepting will be costly for them, as could be the case when inheriting a house with a mortgage. The best thing you can do is make sure your estate is in the best condition possible.

How life insurance can protect your beneficiaries’ inheritance

Even if longevity scientists successfully end aging in your lifetime, disease and accidents will still ensure that you die at some point. Life insurance is one way to optimize how much of your estate survives your passing and makes it to your heirs.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

Loading results ...

How so? Funeral or cremation costs and outstanding debts are just two sorts of expenses that can reduce what remains of your estate for your beneficiaries. And are you aware that some of your use of public benefits, such as your use of Medicaid at or beyond age 55, could also reduce what remains of your estate?
The right life insurance policy can cover many of these expenses, increasing what’s left for your loved ones. Life insurance also allows you to leave an inheritance without your beneficiaries having to pay income tax on the money they receive. So if you buy a policy with a $300,000 death benefit, your heirs will actually get $300,000.


What is the difference between primary and contingent beneficiaries?

You should think of the primary beneficiary as the person or entity who is “first in line” to receive your inheritance. If this person dies before you, is unwilling to accept the inheritance, or is unable to do so, your assets will go to your contingent beneficiary. Your contingent beneficiary is the person or entity who is “second in line.”
In some contexts, you may hear a “second in line” beneficiary called an “alternate beneficiary” rather than a “contingent beneficiary.”

Who should be the contingent beneficiary?

Your contingent beneficiary can be anyone you choose and can be updated at any time. You should consider naming your spouse, children, close friends, or other family members as your contingent beneficiary. You can also name your favorite charity or a trust as your contingent beneficiary.

Can a spouse be a contingent beneficiary?

Yes, a spouse can be definitely be a contingent beneficiary. It is common for people to choose family and friends as their primary and contingent beneficiaries.

How many beneficiaries should I have?

There isn’t a one-size-fits-all answer to that question. In most cases, the number of beneficiaries you choose is totally up to you. However, in some cases, there may be a limit to how many beneficiaries you can include in an account. Some policies, for example, may have a limit of 10 beneficiaries per asset. As a minimum, consider having one primary beneficiary and one contingent beneficiary, but it’s smart to include more in case any are not around to accept the assets.

Key takeaways

  • A contingent beneficiary is someone who will inherit your estate if your primary beneficiary is unable to do so.
  • Naming a contingent beneficiary does not reduce the inheritance for your primary beneficiary. Instead, it is a good safeguard against the estate going into probate, which can be an expensive and lengthy process.
  • You can name multiple primary and contingent beneficiaries and are free to change who they are at any time.
  • You should review and update your beneficiaries after major life events in the family, such as birth, death, marriage, and divorce.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

Loading results ...

Share this post:

You might also like