The beneficiary you name during your estate planning will receive a particular asset. Usually, this might be a house or other tangible item. However, what happens when the beneficiary is unable to take possession of the asset?
Why Should You Name a Contingent Beneficiary?
If the beneficiary dies before s/he can receive the asset, have a backup who will step in. If there is no contingent beneficiary, you fail to leave your instructions for the disposition of the asset. As a result, your asset may go to someone whom you would not have chosen to receive the item. Another undesirable result could be estate litigation.
Who Is a Good Choice for a Contingent Beneficiary?
Most people select a spouse as a primary beneficiary. Next, you might choose a child. If the child is a minor, remember to appoint a guardian who will administer the estate until the youngster comes of age. That said, do not stop there. For example, if you have adult children with families of their own, consider appointing your grandchildren as contingent beneficiaries in case neither your spouse nor your children can take possession of the asset.
How to Make the Addition of New Beneficiaries Legal
Do not rely on oral statements to friends, family members, or others. Moreover, a simple written statement may not be enough if you have gone through estate planning and there is a trust or will in effect. Working with an attorney who can assist with drafting a codicil to the will or amendment to the trust documents is a better option. Besides that, it offers you an opportunity to review your documents and make any additional changes that you may have been thinking about.