Do You Need to Name Alternate Beneficiaries?

What will happen to your estate if your primary beneficiary does not survive you? If your will does not name alternate beneficiaries, your estate will be divided according to state law. The way the state divides your estate may not agree with your wishes. Your money may go to someone you don't like or to someone who is unable to handle it.

The Need for Alternate Beneficiaries

For example, suppose your will divides your estate among your spouse and three children. If one child dies before you, do you want his or her portion of your estate to go to your grandchildren? To your other children? To your spouse? Or perhaps to a charitable organization or institution? Another issue to consider is whether the person who would inherit under the law is too young or has special needs. In that case, you may need a trust to protect the assets. At the very least, you should consider making sure some trust language is incorporated in your will to provide for those persons.

Double check your will to make sure it names an alternate beneficiary. And if you don't already have a will, being able to name an alternate beneficiary is an important reason to create one.

Alternates in Other Areas

Naming an alternate is a good idea for other provisions built into your will as well. If you have young children, you should also consider naming an alternate guardian for your children in the event your first choice is unable to fulfill his or her obligation. However, with minor children, more extensive planning should be in place outside of your will.

In addition to beneficiaries and guardians for your children, consider the need for naming alternates to your agents. This includes your agent under your durable power of attorney and your agent under your medical power of attorney or healthcare surrogate designation. Additionally, alternate executors or personal representatives and successor trustees should be named.

Being Prepared

No one can predict the future. Rather than having to immediately update your plan because something happens to a beneficiary or an agent, it's better to name the alternate and contingent plan when you originally put it in place.