Television shows and movies depict the executions of last wills and testaments as tense struggles between rival siblings over the estate of their deceased relative. Often, the will would name a single beneficiary to inherit all the decedent’s assets at the climax of these stories.
While it’s possible to name a single primary beneficiary in real life, it’s not advisable. Doing so could jeopardize your estate plan if something happens to the beneficiary. Your estate plan needs to have contingent beneficiaries for such emergencies.
What are contingent beneficiaries?
Also known as secondary beneficiaries, contingent beneficiaries are persons or entities that will receive an asset in your will should something prevent the primary beneficiary from receiving them.
Most experts recommend naming two contingent beneficiaries at the minimum as a failsafe.
What could prevent beneficiaries from claiming an estate’s assets?
Several reasons could prevent a primary beneficiary from receiving an asset upon your death. These include:
- Their death: There’s a possibility that your primary beneficiary could die before you.
- Business closure: If your primary beneficiary is a charity or a non-profit, their business closure prevents employees from receiving your assets.
- Inability to locate: You can name a long-lost relative as a primary beneficiary, but if they cannot be found or contacted, they’ll be unable to claim any assets they’re entitled to.
- Disclaiming: Primary beneficiaries can decline or “disclaim” the asset from your estate. But if they disclaim the assets, they can’t choose who would receive the properties.
What happens if a primary beneficiary can’t claim an asset?
If a primary beneficiary can’t claim an asset from your estate and no contingent beneficiaries are named, the properties go back into your general estate and enter probate. Anyone looking to claim the assets must go through a lengthy and costly probate court process.
Estate planning is complex, and even the slightest technical mistakes, like not naming contingent beneficiaries, can lead to costly errors. An experienced attorney on your side, however, can mean the difference between an efficient process and one complicated by family squabbles and legal battles. Take steps now to ensure your surviving loved ones can avoid unnecessary disputes after your passing.