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What's the difference between a primary and a contingent beneficiary?

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Michelle Blog PhotoWhen designating beneficiaries for your 403(b) and/or IRA account(s), you have the option to name primary and contingent beneficiaries.

Primary beneficiaries are entitled to receive any assets in your account following your death. They will share equally in your account unless you specify different percentages. If a beneficiary predeceases you, his or her share of your account will be divided proportionately among the surviving beneficiaries unless you have indicated you wish their share distributed per stirpes. Per stirpes allows any undistributed assets of your account to pass to the natural and legally adopted children of a designated beneficiary that predeceases you, rather than be divided among the living co-beneficiaries.

Your contingent beneficiaries will be entitled to receive any assets in your account only if you have no surviving primary beneficiaries (and per stirpes was not designated for your primary beneficiaries) at the time of your death. If there are no surviving primary beneficiaries, your contingent beneficiaries will share equally in your account unless you note otherwise.

Keep in mind that beneficiaries named on your retirement account supercede your will. If you have a 403(b) or IRA account with Member Benefits, your beneficiaries may keep the account with us and/or may open a WEAC IRA and rollover the inherited account. They can also name their own beneficiaries for the inherited account.

There are many options and issues to consider when it comes to naming your beneficiaries. You may want to consult your attorney to ensure that you understand all aspects of your decision. For more information on choosing beneficiaries, please read our article, "Who will inherit your 403(b) or IRA account? Don't leave it to chance" in our Spring 2012 issue of your$ magazine.

Michelle Slawny, CFP®

This blog post is for informational purposes only and not intended to be legal or tax advice. Consult your tax advisor or attorney before taking any action.