While many people view drafting a comprehensive estate plan as something of a chore, it is better to approach it as the type of exercise it is – a way to prevent unnecessary confusion in the future. People write their wills to clearly specify the distribution of their assets after death. What happens, however, when the heir has died before you? Or the heir refuses the inheritance?
To account for these situations, an individual must consider naming a secondary or contingent beneficiary in the will.
- The primary beneficiary has died: It is not uncommon for the named beneficiary to pass away before the creator of the will. To eliminate any legal confusion as a new heir is identified, it might be wise to write a contingent beneficiary into the will.
- The primary beneficiary refuses the inheritance: Numerous factors can lead to the primary beneficiary refusing the inheritance. Perhaps the beneficiary does not want to take on the added cost or responsibility of a large physical asset. Perhaps there is a more personal reason. In any event, listing a secondary beneficiary can eliminate any potential trouble.
- The primary beneficiary cannot be located: In certain scenarios, the beneficiary simply cannot be located to distribute his or her inheritance. Identifying a new beneficiary can cost the estate time and money. It is wise to have a contingent beneficiary in place, so the process immediately moves to this individual.
Additionally, it is wise to update an estate plan as relationships change. A primary beneficiary might fall out of favor or a new individual might become more deserving of the asset. It is wise to review and update these documents on a regular basis.
In addition to a will, the individual can name contingent beneficiaries in insurance policies, retirement plans, health savings accounts or a trust. It is wise to consider your options and plan for contingencies when drafting your estate plan. Numerous circumstances can lead to unnecessary confusion and heated familial debates after your passing.
