Most wills, insurance policies, investment plans and annuities include provisional clauses that pass all financial assets of an estate to a designated beneficiary in the event of death. As an additional assurance to the policyholder, contingent beneficiaries are often established as a back up in the event that a beneficiary becomes incapacitated or unable to care for themselves or others.
Contingent Beneficiaries are Necessary Additions to Wills
Legal experts strongly encourage individuals to name at least one secondary beneficiary when establishing a will. This not only provides additional legal and financial protection for loved ones, but also ensures that the wishes of the deceased are carried out.
Insurance Policies need a Beneficiary Too
In addition to wills, secondary beneficiary choices are often written into insurance policies as well. Insurance policies, which deal primarily with cash payouts, need an alternate beneficiary to be named in the event the main beneficiary suddenly dies or becomes unable to inherit the estate.
Beneficiaries are Vital with Minor Children are Involved
As an additional protection for minors, naming a secondary beneficiary provides children with a guardian in the event something happens to the main beneficiary. Without the provision of an additional beneficiary, the welfare of minor children can become uncertain, along with the estate and financial assets of the deceased. By choosing multiple beneficiaries, parents and guardians have peace of mind that their childrenís future is protected.
Financial Provisions for Minors
In some cases, parents may assign their minor children as beneficiaries of their estate and financial assets. However, in these instances, the secondary beneficiary is required to use the proceeds of the estate to care for the children until they come of legal age. Afterwards, the remainder of the estate passes directly into their hands and can be divided according to the terms of the will or insurance policy.
Providing for a Spouse
Although most individuals stipulate a spouse or partner as the main beneficiary of their will or insurance policies, there are instances in which they may be incapable of caring for themselves. In this case, an alternate beneficiary steps in and assumes care of the remaining spouse or partner of the deceased.
Adult Children as Contingent Beneficiaries
Often, in cases of aging parents, adult children act as contingent beneficiaries. In these cases, they use the proceeds of the estate or insurance policy to finance care for the parent. After the remaining parentís death, the remainder of the estate and financial assets are then passed to the child.
Carrying Out Final Wishes
Some individuals wish to contribute financially upon their deaths to causes and charities that are close to their hearts. As an alternative, policyholders may chose to pass the entirety of their estate to a charity that is cited as the main beneficiary In a world of uncertainties, it is necessary to plan and prepare financially and legally for loved ones. By being proactive and planning now, individuals can rest assured that their loved ones will be cared and their final wishes carried out in the event of their death.