Contingent Beneficiaries

Contingent Beneficiaries

You finally have gotten around to taking care of business and have established your revocable living trust which names your three children as equal primary beneficiaries. Some years pass, and, as sometimes happens, one of your children predeceases you. If you failed to name a contingent, or secondary, beneficiary, that child’s share could end up being probated. To avoid this potential problem, your living trust or last will and testament, and other financial contracts such as life insurance policies, retirement policies, Certificates of Deposit, and bank accounts, should contain a provision to direct the share of a deceased beneficiary to another beneficiary. A typical revocable living trust contingent beneficiary provision reads as follows:

Contingent Beneficiaries. Except as otherwise provided herein, the share of a deceased beneficiary shall be held, administered, and distributed as follows:

A.Beneficiary Leaves Issue. If any beneficiary should die prior to receiving final distribution leaving lawful living issue, the undistributed principal and income of such beneficiary's share shall be held, administered, and distributed to or for the benefit of such issue by right of representation.

B.Beneficiary Leaves No Issue. If any beneficiary should die prior to receiving final distribution without leaving lawful living issue, the undistributed principal and income of such beneficiary's share shall be added to and shall proportionately augment the shares set aside for the benefit of the other beneficiaries entitled to a share of the residue.

C.Heirs at Law. If all of the foregoing beneficiaries should die prior to final distribution of the trust estate, and if all or any portion of the trust estate should not be disposed of under the provisions hereof, then upon the death of the last of such beneficiaries to die, all of the trust estate not so disposed of shall be distributed to the heirs at law of the Settlor, such heirs to be determined by and in accordance with the laws of the State of California relating to intestate succession in effect when this Trust was created, except that such heirs shall not include any persons otherwise specifically omitted.

It’s a good idea to review your estate planning documents and other contracts to reconfirm who your contingent beneficiaries are, especially if any primary beneficiaries have predeceased you. For trusts and wills, simply review the document. For contracts such as life insurance, annuities, and other retirement accounts, you can usually call the “1-800" number on your statement and request the administrator to send you information on who the current beneficiaries are, and a change of beneficiary form if you want to make any changes.

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