Key Takeaways
- A primary beneficiary is first in line to receive an account or policy when you die.
- A contingent beneficiary receives it only if every primary beneficiary has died, can’t be found or declines.
- Beneficiary designations override your will, so an outdated form can send money to an ex.
- Naming a minor directly can force a court to supervise the money; use a trust or custodian instead.
- Review every designation after marriage, divorce, a new partner, a birth or a death.
How beneficiary designations work
Many of your most valuable assets don’t pass through your will at all. Life insurance, 401(k)s, IRAs, annuities and many bank and brokerage accounts go directly to the people named on the account’s beneficiary form. That’s fast and avoids probate, but it means the form, not your will, decides who gets the money.
Most forms ask for two tiers of beneficiaries: primary and contingent.
Primary vs. contingent at a glance
| Primary beneficiary | Contingent beneficiary | |
|---|---|---|
| When they inherit | First, at your death | Only if no primary beneficiary can inherit |
| Typical choice | Spouse or partner | Children, a trust, other relatives or a charity |
| Can there be more than one? | Yes, with percentages that total 100% | Yes, with percentages that total 100% |
| What if none is named? | The account may go to your estate and through probate | Same, if the primary also can’t inherit |
Example: You name your partner as primary beneficiary (100%) and your two children as contingent beneficiaries (50% each). If your partner survives you, your partner receives everything. If your partner dies first, or you die together, your children split it.
Per stirpes vs. per capita
If a beneficiary dies before you, what happens to their share? Many forms let you choose:
- Per stirpes: the deceased beneficiary’s share goes to their descendants (for example, a child’s share passes to that child’s kids).
- Per capita: the share is divided among the surviving beneficiaries in that tier.
If you don’t choose, the account’s rules or state law decide.
Common mistakes
- Forgetting to update after a breakup or divorce. Some state laws revoke an ex-spouse’s designation automatically, but federal rules for many employer plans may not, and these laws rarely cover ex-partners.
- Not naming a contingent beneficiary. If your primary beneficiary dies first, the money may go to your estate and through probate.
- Naming a minor child directly. Children can’t manage an inheritance; a court may need to appoint someone. Name a trust or a custodian instead. See estate planning for young families.
- Naming “my estate.” This sends the money through probate and can expose it to creditors.
- Assuming your will controls. It doesn’t, for these accounts.
Special notes for unmarried couples
Beneficiary designations are one of the easiest and most powerful tools for unmarried partners, because the law otherwise gives a partner nothing. Married people should know that federal law generally requires a spouse’s written consent before someone else is named as primary beneficiary of a 401(k) or similar employer plan. For more, see estate planning for unmarried couples.
Frequently asked questions
No. For life insurance, retirement accounts and other accounts with beneficiary forms, the designation controls, even if your will says something different.
Yes. You can name several primary beneficiaries and give each a percentage, as long as the percentages total 100%.
The account usually goes to your estate and is distributed through probate under your will, or under state law if you have no will.
Yes. Naming a trust is common when beneficiaries are minors or need help managing money. The trust’s terms then control how the money is used.
At least every few years and after every major life event: marriage, divorce, a new relationship, a birth or adoption, or a beneficiary’s death.
Keep reading
- Estate Planning for Unmarried Couples: How to Protect Each OtherUnmarried partners have few automatic legal rights. Learn which documents let you make medical decisions, share information and inherit from each other.
- Cohabitation Agreement: What It Covers and Why Couples Sign OneA cohabitation agreement sets out how unmarried partners share property, expenses and debts, and what happens if they split up. Here's what to include.
- Domestic Partnership vs. Marriage: What’s the Difference?Domestic partnership and marriage give couples very different legal rights. Compare inheritance, taxes, benefits and medical decisions, and learn what an agreement adds.
- Can an Unmarried Partner Make Medical Decisions for You?In many states an unmarried partner isn't next of kin for medical decisions. Learn how a health care power of attorney and HIPAA release give your partner a voice.
Make sure your partner can be there for you
Give each other access to medical information and put your partnership in writing with HIPAA, medical authorization and a domestic partnership agreement. The No Brainer Box adds powers of attorney and a living will.
- Answer a few simple questions online
- Download your completed, ready-to-sign forms
- Sign them and keep copies in your account
This guide is general educational information written by the No Brainer Forms Team. It is not legal advice, and No Brainer Forms is not a law firm. Laws and signing requirements vary by state; for advice about your situation, talk to a licensed attorney in your state.