Valentine’s Day is probably most thought of as a romantic date night with your significant other over a candlelit dinner at the nicest spot in town. Or maybe it’s just about spending some quality time with the person you love and forgetting about the world for a little while.
Not often is it the time when people think about the importance of primary and contingent beneficiaries, but maybe now is a good time to start.
Beneficiary-named financial accounts include 401ks, insurance policies, IRAs, 529 college plans, health savings plans, or trusts and, as the name states, allow you to name a beneficiary to receive your benefits or take ownership of the accounts should you pass away.
The people who you choose to be next in line after yourself to receive these benefits are your primary beneficiaries. Contingent beneficiaries are those who are next in line from your primary beneficiary should they not be alive to collect the assets.
You are able to name more than one primary and contingent beneficiary, however. For example, you may want to name your husband as your 100 percent primary beneficiary and your child as 100 percent contingent beneficiary. Or, if you have two children, they could each be named 50 percent contingent beneficiaries. You can also name your husband as 50 percent primary beneficiary of the account and your two children 25 percent beneficiaries each.
Both primary and contingent beneficiaries can be changed on most accounts rather easily. However, it is something that you may not remember often and, if you signed up for an account years ago, you may have someone as your beneficiary who you may not want. It’s always a good idea to go in every few years to update your primary and contingent beneficiaries to make sure they are up to date.
Having appropriate primary and contingent beneficiaries can be especially important when dealing with estate planning if you pass away.
Also, note that while you may feel you’re covered if your will names your beneficiaries, note that some accounts that have beneficiary designations may be referred to as will substitutes, which means that they can potentially override anyone named in your will.
To be safe, always remain up to date on your primary and contingent beneficiaries, especially if you can’t quite recall who is yours on each of your accounts.
The content in this article is meant for informational purposes only. Please speak with a financial advisor or qualified professional before making any decisions or changes to your financial accounts.