Naming beneficiaries is an important part of the process of your estate planning. Everyone understands the importance of naming primary beneficiaries, but secondary beneficiaries are often overlooked. Here are the basics of what secondary beneficiaries are and why they are important.
When you name beneficiaries, you are going to start by naming your primary beneficiaries. These individuals will receive your assets when you die. At the same time, you should also put some thought into naming a secondary beneficiary. A secondary beneficiary is going to receive your assets if a primary beneficiary dies before you do. A secondary beneficiary is also referred to as a contingent beneficiary in some cases.
You are going to need to name secondary beneficiaries on a number of different things during your estate-planning process. For example, if you have a life insurance policy, you are going to need to consider naming a secondary beneficiary. If you have a retirement account, such as an IRA, you should also consider naming a secondary beneficiary. When creating your will, you should also name contingent beneficiaries in case the first beneficiaries pass away unexpectedly. This will make sure that your assets get to someone that you designate instead of being distributed according to decisions of the court system.