Many individuals struggle through drafting a comprehensive estate plan only to realize they left out crucial information. Forgetting to include digital assets, for example, or provisions for travel and shipping costs can throw a smooth probate process into disarray. One element that people often overlook is the need for secondary beneficiaries.
Secondary beneficiaries, also called contingent beneficiaries, can be listed in various estate planning documents to account for numerous issues, including:
- The primary beneficiary has died: As the testator ages, it is not uncommon for the primary beneficiaries listed in a will or trust to pass away. If the estate planning documents are not updated to account for the death of a loved one or primary heir, the distribution of assets could face an increased layer of complexity.
- The primary beneficiary cannot be located: While the testator might include information regarding a last known address, it is not uncommon for people to grow apart. Cross-country moves, international addresses or simply the choice to live off-grid can make it challenging to locate the primary beneficiary.
- The primary beneficiary refuses the inheritance: This can happen for several reasons. The reasons can be financial, including tax implications of the asset or future costs associated with ownership. The reasons might also be personal such as an objection to the asset in particular or the result of a difficult relationship with the decedent. In any case, the primary beneficiary might reject the inheritance.
It is wise to include contingent beneficiaries on all crucial estate planning documents. Wills, trusts, retirement plans and life insurance policies can all benefit from carefully crafted contingencies. It is important to take the time needed to develop a strong, effective estate plan that accounts for as many challenges as possible.