How to Formally Name an Alternate Beneficiary

An alternate beneficiary is a person or entity designated to receive an asset if the primary choice cannot. This designation ensures that assets from retirement accounts, life insurance policies, and other financial products are distributed according to your wishes. Naming an alternate, or contingent, beneficiary helps prevent your assets from being redirected to your estate. Assets that fall into an estate without a named beneficiary become subject to the probate process, a potentially lengthy court proceeding.

Role and Types of Beneficiaries

The primary beneficiary is the individual or entity first in line to receive your assets upon your death. You can name more than one primary beneficiary and specify the exact percentage of the asset each should receive. For these designations to be effective, the primary beneficiary must be alive and legally able to accept the assets when you pass away. If all primary beneficiaries are unable to inherit, the assets then pass to the next level of designation.

This next level is the contingent beneficiary, who only receives the assets if all primary beneficiaries have passed away, cannot be located, or formally refuse the inheritance. This refusal, known as a qualified disclaimer, must be made in writing before the beneficiary accepts any of the assets. This action irrevocably redirects the asset to the contingent beneficiary.

A less common option is the tertiary beneficiary, who serves as a third line of defense. They inherit only if all primary and contingent beneficiaries are unable to receive the assets. The structure of these designations creates a clear succession plan, ensuring assets are distributed as intended.

When naming beneficiaries, particularly those with descendants, you may encounter the terms per stirpes and per capita. A per stirpes designation, meaning “by branch,” ensures that if a named beneficiary predeceases you, their share automatically passes to their own children or descendants. In contrast, a per capita or “by head” designation would redistribute a deceased beneficiary’s share equally among the remaining living beneficiaries at the same level.

Information Required to Designate an Alternate Beneficiary

To formally name an alternate beneficiary, you must provide specific identifying information to the financial institution or plan administrator. This information prevents ambiguity and facilitates a smooth transfer of assets.

You will need to supply the full legal name of the person you are designating. You must also provide their date of birth and Social Security Number (SSN) or, for an entity like a trust, a Taxpayer Identification Number (TIN).

A current mailing address and the beneficiary’s relationship to you are also standard requirements. This data is entered onto a specific “Beneficiary Designation Form” that you must obtain from the institution managing the asset, such as an IRA custodian, 401(k) plan administrator, or life insurance company.

How to Formally Name an Alternate Beneficiary

The method for naming an alternate beneficiary depends on the type of asset. For retirement accounts like traditional IRAs, Roth IRAs, and 401(k)s, the beneficiary designation on file with the account custodian or plan administrator supersedes any instructions in a will. To make a designation, you log into your account through the provider’s online portal or request physical forms that can be completed and returned by mail.

For life insurance policies, the process is similar and is managed directly by the insurance carrier. You must contact the company to request their specific beneficiary designation form. After submission, you should receive a confirmation that your designations have been recorded.

Designating beneficiaries for assets that are part of a trust or that will be distributed through a will requires a different process. These designations must be formally included in the legal documents themselves. This requires working with an attorney to draft or amend the will or trust agreement. Unlike retirement accounts or life insurance policies, assets passed through a will are subject to the probate process, where a court oversees the distribution.