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What's the difference between primary and contingent beneficiary?

No matter when you decide to initiate the estate planning process, it is important to understand what decisions you need to make and how it could impact how your wishes and intentions are played out. When it comes to retirement accounts, you must be sure to name a beneficiary. In addition, that named beneficiary should not conflict with those named in your will. While this can seem easy enough, individuals in Ohio and elsewhere can find this process challenging and confusing, especially when they are required to name an added beneficiary as a contingency.

What's the difference between a primary and contingent beneficiary? With regards to accounts such as a life insurance policy, a beneficiary is the person that will receive your death benefit. It is possible to name one or more persons, a charity or an estate; however, if you have a trust set up, you can also name the trustee.

When you are establishing a beneficiary for your life insurance policy, you are asked to include the names and social security numbers of those you intend to receive the proceeds of your policy. The first person you name is the primary or main beneficiary. Thus, the second person named is the contingent or secondary beneficiary.

The primary beneficiary is the person first in line to receive your life insurance proceeds when you die. This is typically a parent, sibling, spouse or child. Anyone named as a primary, as one can name more than one person, will receive equal shares of these proceeds or the percentage you designated. On the other hand, a contingent beneficiary is entitled to receive the insurance proceeds if the primary beneficiary cannot be located or have died.

While you might feel comfortable now with the individuals you have named as beneficiaries for a life insurance policy, retirement account or any other policy, it is important to continually review and update these documents. Failing to do so could result in issues with your will and the wrong beneficiaries receiving your assets.

Source: Livestrong.com, "Life Insurance Primary Vs. Contingent Beneficiaries," Karen Hellesvig-Gakell, June 13, 2017

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