Creating a detailed estate plan that addresses different contingencies is the best way to ensure your plan is effective when the time comes. A crucial aspect of this process involves naming beneficiaries, typically including both a primary and a contingent beneficiary for each asset. Contingent beneficiaries receive assets only if they meet certain conditions or when the primary beneficiary cannot or will not.
The Law Office of Andrew M. Lamkin, P.C., focuses exclusively on estate planning, elder law, and Medicaid planning. We provide personalized services by working closely with individuals and families to craft plans tailored to their unique circumstances. We emphasize asset protection, timely legal updates, and attentive support to meet your estate planning needs.
Primary Beneficiary Meaning
Briefly, a beneficiary is a person or entity you designate to receive certain assets in legal documents, like wills, trusts, and life insurance policies. A primary beneficiary is the principal person or entity you name to receive an asset. When the primary beneficiary can and is willing to accept the inheritance, the assets transfer directly to them.
Unforeseen circumstances can arise that mean the primary beneficiary does not or cannot receive the assets. In the law, we often describe provisions directing who should receive what as “devising” assets. If the primary beneficiary cannot or will not accept the devise, the devise fails. Those assets may go to the wrong person if you do not have a backup plan. To address the risk of a beneficiary being unwilling or unable to accept, you can designate contingent beneficiaries.
Contingent Beneficiary Meaning
So, what is a contingent beneficiary? A contingent beneficiary may be a backup recipient for the primary beneficiary. Whether they receive the assets intended for them is generally contingent on the devise to the primary beneficiary failing. A contingent beneficiary can also be the subject of a devise stating they only receive assets if certain conditions occur. Whether they become beneficiaries is contingent upon meeting those conditions.
Conditions on Devises
You can place conditions to ensure that beneficiaries meet specific requirements or achieve certain goals to qualify for the devise. Note that a conditional devise only creates a contingent beneficiary if its conditions are absolute—if the beneficiary fails to meet the condition, the devise fails.
Contingencies may involve, for example, requiring the individual:
- Be married or unmarried,
- Have children,
- Achieve specific educational or career goals,
- Refrain from illegal actions or unhealthy activities like smoking, or
- Be involved with the family business for a certain time or in a particular role.
You may, for example, declare that you are leaving all of your hand-me-down childcare equipment to a certain person “if they have children.” If they do not have children, they do not receive the assets.
Failed Devises
Under New York law, devises to primary beneficiaries can fail for several reasons, commonly including when the:
- Beneficiary dies before (“predeceases”) the deceased person (“decedent”);
- Decedent disposes of (sells, gives away, or destroys) the property;
- Devise is invalid;
- Beneficiary refuses to accept (“disclaims”) the devise; or
- Estate has more debts than the will accounts for.
Devises may be invalid due to the following:
- Legal issues related to the document’s creation, such as undue influence when the decedent created their will;
- Conflicts with the law, like the surviving spouse taking their “elective share” of the estate when the will’s provisions leave the spouse less than that share; or
- Violations of public policy, for example, the devise was part of an illegal agreement.
When a devise fails, and no alternative instructions appear to redirect the asset, it may pass under New York’s intestate succession laws.
What Is Intestate Succession?
In New York, intestate succession is the process of distributing the assets of a person who dies without a valid will. Under intestate succession law, the following rules apply to the estate’s distribution:
- If the decedent is married and has children, the spouse receives the first $50,000 plus one-half of the remaining estate, while the children share the remaining half equally;
- If the decedent left no surviving spouse, the estate is divided equally among their children;
- If the decedent had no surviving spouse or children, the estate goes to other family members in a specific order—parents, siblings, nieces and nephews, aunts and uncles, cousins, and other descendants of the decedent’s grandparents; and
- If the decedent had no living relatives or the estate cannot locate them, the estate property goes to the State of New York.
This system attempts to pass property as the decedent would have wanted but allows for little nuance.
How Do You Name a Contingent Beneficiary?
To name a contingent beneficiary, include instructions for what should happen if a devise fails directly in the document where you make the devise. You may want to include contingent beneficiaries in:
- Your will.
- Trusts,
- Retirement accounts, and
- Life insurance policies.
When you name a contingent beneficiary, ensure you:
- Identify the contingent beneficiary using their full legal name;
- Outline the conditions under which the contingent beneficiary inherits; and
- Include contingencies for each asset in your will.
By naming contingent beneficiaries, you can exercise more nuanced control over your estate and provide a plan for the unexpected.
Primary vs Contingent Beneficiary
While primary and contingent beneficiaries serve similar purposes, their roles differ in key ways.
Primary beneficiaries:
- Receive assets first,
- Inherit without conditions, and
- Have immediate access to their designated portion of the estate.
Contingent beneficiary designations:
- Specify that the beneficiary inherits only if they meet specific conditions or the primary beneficiaries cannot or will not accept,
- Avoid assets being distributed under state law, and
- Often require formal documentation to confirm the primary beneficiary’s ineligibility.
Using both types of beneficiaries adds flexibility and prepares your estate for unexpected events. These designations reduce potential delays and legal challenges during the distribution process.
Benefits of Naming Contingent Beneficiaries
Including contingent beneficiaries in your estate plan offers several advantages, such as:
- Reducing conflicts between your loved ones,
- Avoiding default legal rules,
- Bypassing disputes over the meaning of ambiguous conditions, and
- Minimizing probate delays.
Naming contingent beneficiaries also has potential tax implications for the beneficiary and estate.
Protect Your Legacy
Naming primary and contingent beneficiaries strengthens your estate plan by ensuring the distribution of your assets according to your wishes. These designations can prevent disputes, streamline legal processes, and give you peace of mind. At the Law Office of Andrew M. Lamkin, P.C., we bring over 15 years of experience in estate planning and elder law to help clients secure their legacies. Contact us today to schedule a consultation and discuss your options to protect your assets and provide for your loved ones.
Andrew Lamkin is principal in the law firm of Andrew M. Lamkin, P.C., where he focuses his practice in the areas of elder law, estate planning and special needs planning, including Wills and Trusts, Medicaid planning, estate administration and residential real estate transactions. He is admitted to practice law in New York and New Jersey.
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