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Last Modified on Feb 17, 2022
What is a secondary beneficiary? A secondary beneficiary is a person you name to receive assets in the event the primary beneficiary cannot or will not. This is an important part of creating a comprehensive estate plan to protect your estate and your loved ones.
The Importance of an Estate Plan
A well-rounded estate plan consists of documents that must be reviewed every so often to make sure they align with the evolving needs of the estate. Life changes as people get married, have children and grandchildren, or sometimes divorce. Estate planning documents in North Carolina need to be updated to reflect these type of significant life changes.
An estate plan should also contain contingencies to prevent unnecessary future delays or disputes. This includes creating contingent or secondary beneficiaries to prevent confusion or disagreements over your estate. If your assets do not have beneficiaries, the state laws determine their distribution.
About 12.7% of the homes in Gastonia are valued at $500,000 or more. A house can be a significant asset that you pass along in your estate plan, and clarity in distribution is essential. Unfortunately, only an estimated 32% of Americans have a will that clearly distributes their assets to their beneficiaries. Creating a will and establishing both primary and secondary beneficiaries helps streamline probate and make things easier for your family.
Secondary or contingent beneficiary
A secondary beneficiary is someone named in estate planning documents as an alternate beneficiary. This is primarily for a will. A secondary beneficiary exists for situations where the main beneficiary is deceased or doesn’t accept the distribution of assets. There are reasons to add a secondary beneficiary to an estate plan, such as:
- Death of beneficiary. For many large physical assets, individuals might choose to list a secondary beneficiary to prevent unnecessary delays in the probate process. With a contingent beneficiary in place, if the primary beneficiary dies before the testator, the asset does not spend any additional time in probate while the court investigates proper distribution.
- Changes in relationships. Relationships can change as life marches on. Whether this means people forge a new friendship or disputes disrupt a history of commonality, it is wise to make revisions in an estate plan as changes come up. In terms of contingent beneficiaries, an individual might list an alternate in the event the primary beneficiary doesn’t accept the distribution of assets.
- Cannot be located. Sometimes, a beneficiary cannot be found when assets are distributed. When assets cannot be held and must be distributed to close probate, they can go to the secondary beneficiary.
Professionals suggest people revise their estate planning documents every three to five years. As North Carolina residents get older, they should take into consideration that their main beneficiaries are also aging.
This is the same consideration that makes it important to name secondary beneficiaries for larger assets like real property and insurance policies. Some individuals might also consider including contingent appointments for their power of attorney or healthcare power of attorney.
The Benefits of a Secondary Beneficiary
There are several benefits to establishing secondary beneficiaries. These include:
- Providing peace of mind over your wishes being carried out
- Avoiding assets and accounts having no beneficiaries
- Preventing assets from being distributed under North Carolina intestacy laws
- Making the process of distributing assets and closing an estate during probate faster
FAQs
Q: What Is the Purpose of a Secondary Beneficiary?
A: The purpose of a secondary beneficiary is to name an alternate person to benefit from your assets in case the primary beneficiary cannot receive them. This is common for wills, trusts, retirement accounts, life insurance accounts, and other beneficiary designations on specific assets.
If the primary beneficiary dies, cannot be found, or refuses to accept the assets, the secondary beneficiary receives them. This also prevents the assets from being subject to state inheritance laws.
Q: What Is the Difference Between Primary and Secondary Beneficiaries in Estate Planning?
A: The difference between the primary and secondary beneficiaries in estate planning is that the primary beneficiary receives the stated assets in all cases except if they predecease the individual who named them a beneficiary, or if they cannot be found. A secondary beneficiary only receives the assets when the primary beneficiary does not or cannot receive the assets.
Q: Who Has More Power, a Beneficiary or an Executor?
A: Both beneficiaries and executors have power during the probate process, although in different ways. The executor has the ability to manage the estate, take the necessary legal steps, and distribute assets. The beneficiary does not have these abilities. If the executor is mismanaging the estate, not following the will or inheritance laws, or failing to uphold their fiduciary duty, a beneficiary can take this issue to the probate court.
Q: What Happens if You Have Two Primary Beneficiaries?
A: If you have two primary beneficiaries in a will, trust, life insurance policy, or other estate planning document, then each receives half of the assets you allocated to them. If either beneficiary cannot or will not accept the assets, then the other party receives them all. To plan for other contingencies, you can provide a secondary beneficiary to benefit if both primary beneficiaries cannot.
Hire an Estate Planning Lawyer
When you hire an estate planning lawyer from The Jonas Law Firm, P.L.L.C., we can help you create contingencies to give you certainty in your estate plan. Contact our team and receive advice from an estate planning attorney today.
