As you assign a beneficiary, you may be surprised to learn that you need to name more than just one. You can name all sorts of beneficiaries, but learning the different types can help you divide your inheritance properly between all of your loved ones.
Primary Beneficiary
The primary beneficiary is a beneficiary of a will, trust, or insurance policy that is first in line to receive named benefits. In many cases, the primary beneficiary is your spouse (and some benefits require you to name your spouse). For example, your employer-sponsored retirement plan generally requires you to get written permission to name someone other than your spouse as your primary beneficiary. This doesn’t automatically mean that you need to assign your spouse. You can name anyone you want as your primary beneficiary, and they will be the first to inherit your assets after you pass.
Contingent Beneficiary
Assigning a primary beneficiary is a no-brainer, but many people forget to assign a contingent beneficiary?even though it’s just as important. A contingent beneficiary is an alternative choice to receive the proceeds of your inheritance if the primary beneficiary is not alive to accept the benefits. Essentially, the contingent beneficiary is second in line after the primary. For example, you can set your spouse as the primary beneficiary and your children as the contingent beneficiaries.
Irrevocable Beneficiary
This type of beneficiary is pretty self-explanatory. When you assign someone as an irrevocable beneficiary, this means that it cannot be changed without their consent. Choosing a beneficiary can be a difficult task, but an irrevocable beneficiary can be particularly challenging to assign since it can be so hard to remove them as a beneficiary later in life.
Revocable Beneficiary
A revocable beneficiary is the opposite of an irrevocable beneficiary: You can change the name at any time without consent from any other person. To change a revocable beneficiary, you’ll still need to fill out paperwork to document the alteration. Remember that divorce doesn’t change your beneficiary, nor does your will. This is why it’s important to review your beneficiary information on a regular basis for all accounts.
Life Insurance Beneficiary
On top of primary, contingent, irrevocable, and revocable, you can name beneficiaries for each type of account you own?including a life insurance beneficiary. A life insurance beneficiary is an individual who receives benefits after your passing. Traditionally, someone will assign a primary and contingent beneficiary for life insurance policies. Typically, the person named is a spouse or a child (though this doesn’t always have to be the case).
Trust Beneficiary
Like life insurance, you can assign a beneficiary specifically for your trust. This individual won’t receive life insurance benefits unless it’s the same person named as primary beneficiary on your life insurance policy. A person named as your trust beneficiary can receive payments from the trust, obtain information about the trust, and can end the trust if they so choose. For this reason, it’s important to consider who you name as your trust beneficiary. Additionally, a trust beneficiary has the right to remove the trustee through a petition to the courts if they believe the trustee isn’t acting in their best interest.
