What Is a Contingent Beneficiary, and What Happens If You Don’t Name One?

The short answer: a contingent beneficiary is the person or trust that receives an account, a policy, or a gift when the primary beneficiary has died, disclaimed, or cannot be found. It is the backup. Naming one costs nothing and takes a minute on the form, and failing to name one is among the most expensive omissions in estate planning. When a primary beneficiary of a retirement account has died and no contingent is named, the account usually falls to the owner’s estate, goes through probate, and loses the ten-year payout that a named individual would have had. Life insurance paid to an estate loses its protection from the insured’s creditors. And a beneficiary designation that ends at “my children” without saying what happens if a child dies first may or may not pass to that child’s children, depending on which state’s law applies and what kind of asset it is.

This article explains how primary and contingent beneficiaries work, what the default rules are in New Jersey, New York, and Connecticut when a beneficiary dies first, what happens when no beneficiary survives, the special problems with retirement accounts, minors, and disabled beneficiaries, and how divorce and remarriage change the answer.

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What Is the Difference Between a Primary and a Contingent Beneficiary?

The primary beneficiary is first in line. The contingent, sometimes called the secondary or alternate, takes only if no primary beneficiary survives to receive the asset or every primary beneficiary disclaims it. A married parent typically names the spouse as primary and the children as contingents in equal shares, so that if the couple dies together or the survivor never updates the form, the children receive the account without a court’s involvement.

Both designations can name more than one person, and the form usually asks for percentages. Two children named as primaries at 50 percent each share the asset. Two children named as contingents share it only if the spouse is gone. The form may also allow a designation “per stirpes,” so that a deceased child’s share passes to that child’s children rather than to the surviving siblings. That box, and what it means under each state’s law, is where most of the trouble lives.

Beneficiary designations matter because they override the will. In New York, EPTL 13-3.2 provides that the rights of a person designated as beneficiary of a pension, retirement account, or insurance contract “shall not be impaired or defeated by any statute or rule of law governing the transfer of property by will, gift or intestacy.” The same principle governs in every state. A will that leaves everything to three children equally does nothing to an IRA whose form names one of them. Our article on updating a will makes the point that updating the will does not update the forms.

What Happens When a Beneficiary Dies Before You?

The answer depends on whether the asset passes under a will or by beneficiary designation, and on the state.

Under a will, every state has an anti-lapse statute that saves a gift to a close relative who dies first by passing it to that relative’s descendants. New Jersey’s N.J.S.A. 3B:3-35 provides that if a devisee “who is a grandparent, stepchild or a lineal descendant of a grandparent of the decedent” fails to survive, “any descendants of the deceased devisee who survives the decedent by 120 hours take by representation in place of the deceased devisee.” New York’s EPTL 3-3.3 saves a disposition “to a beneficiary who is one of the testator’s issue or a brother or sister” who dies “leaving issue surviving such testator,” so that the gift “vests in such surviving issue, by representation.” Connecticut’s General Statutes 45a-441 provides that when a devisee “being a child, stepchild, grandchild, brother or sister of the testator, dies before him, and no provision has been made in the will for such contingency, the issue of such devisee or legatee shall take the estate.” A gift to a friend or a cousin, in all three states, simply fails and falls into the residue.

Under a beneficiary designation or a trust, the states diverge. New Jersey extends its rules of construction to non-probate transfers. Under N.J.S.A. 3B:3-33.1(b), “the word ‘will’ shall include a trust or other governing instrument” and “the word ‘devisee’ shall include a beneficiary of a trust or other governing instrument,” so a New Jersey resident’s IRA left to a child who dies first passes to that child’s descendants under the anti-lapse rule, unless the instrument or the account’s terms show a contrary intent. New York’s EPTL 3-3.3 speaks only of a “testamentary disposition,” and Connecticut’s 45a-441 speaks of a “devisee or legatee”; neither has a statute we have found extending anti-lapse to beneficiary designations. In New York and Connecticut, then, what happens to a deceased child’s share of an IRA is governed by the account agreement and the words on the form, which often provide that the share goes to the surviving primary beneficiaries. The deceased child’s children may receive nothing.

The fix is the same everywhere: say what you want on the form. Name the contingent beneficiaries. If you want a deceased child’s share to go to that child’s children, check the per stirpes or by-representation box, or write it in, and confirm that the custodian’s form supports it.

What Do “Per Stirpes” and “By Representation” Mean?

Both describe how a deceased beneficiary’s share is divided among that beneficiary’s descendants, and they can produce different results. New York defines both. Under EPTL 1-2.14, a per stirpes distribution divides the property at the first generation into as many shares as there are living members and deceased members with living issue, and “the share of a deceased issue in such nearest generation who left surviving issue shall be distributed in the same manner to such issue,” so each branch of the family keeps its own share down the line. Under EPTL 1-2.16, a distribution by representation divides the property the same way at the first generation, but “the remaining shares, if any, are combined and then divided in the same manner among the surviving issue of the deceased issue,” so grandchildren in the next generation share equally with one another regardless of which parent they descend from. New Jersey’s N.J.S.A. 3B:1-2 defines “representation” the New York way, per capita at each generation, and does not separately define per stirpes. Connecticut has no statutory definition of either term, and its courts read “legal representatives” in the intestacy statute to mean lineal descendants taking per stirpes.

For a family with two children and unequal numbers of grandchildren, the two methods give the grandchildren different amounts. A form that says “per stirpes” in New York means one thing; the same form in New Jersey, where the statute defines only representation, may be read differently. Where the difference matters, the designation should describe the division in words rather than rely on the label.

What Happens If No Beneficiary Survives?

The asset goes to the estate, and the consequences depend on the asset.

For a securities account registered in transfer-on-death form, the statutes in all three states say so directly. New Jersey’s N.J.S.A. 3B:30-8, New York’s EPTL 13-4.7, and Connecticut’s General Statutes 45a-468g each provide that on the death of the sole owner “ownership of securities registered in beneficiary form passes to the beneficiary or beneficiaries who survive all owners,” and that “if no beneficiary survives the death of all owners, the security belongs to the estate of the deceased sole owner.” An account intended to avoid probate then goes through probate.

For a retirement account, the estate is not an individual, and the tax rules treat the account as having no designated beneficiary. The IRS’s Publication 590-B puts it plainly: “If the owner’s beneficiary isn’t an individual (for example, if the beneficiary is the owner’s estate), the 5-year rule, discussed later, applies,” and “the 5-year rule requires the IRA beneficiaries who are not taking life expectancy payments to withdraw the entire balance of the IRA by December 31 of the year containing the fifth anniversary of the owner’s death.” A named child would have had ten years under Section 401(a)(9)(H) of the Internal Revenue Code; an estate has five, or, if the owner died after the required beginning date, the owner’s remaining life expectancy. The income tax on a large account compressed into five years can cost the family a third of it.

For life insurance, the estate as beneficiary forfeits the creditor protection each state gives a named person. New Jersey’s N.J.S.A. 17B:24-6 entitles “the lawful beneficiary, assignee or payee” of a policy “to its proceeds and avails against the creditors and representatives of the insured,” but expressly excludes proceeds payable to “the executors or administrators of such insured.” New York’s Insurance Law 3212(b) protects a third-party beneficiary “as against the creditors, personal representatives, trustees in bankruptcy and receivers” of the insured, and Connecticut’s General Statutes 38a-453 protects a beneficiary “being a person other than the insured” against “the representatives or creditors of the insured.” Proceeds that fall into the estate pay the insured’s debts first.

Why Do Retirement Accounts Need Special Care?

Because the identity of the beneficiary decides the tax. Since the SECURE Act, most non-spouse beneficiaries must empty an inherited IRA or 401(k) within ten years; under Section 401(a)(9)(H)(i), the old five-year rule for non-individual beneficiaries is applied to designated beneficiaries “by substituting ’10 years’ for ‘5 years’.” A short list of “eligible designated beneficiaries” under Section 401(a)(9)(E)(ii) may still stretch payments over life expectancy: “the surviving spouse,” “a child of the employee who has not reached majority,” a “disabled” or “chronically ill individual,” and a person “not more than 10 years younger than the employee.” The final regulations issued in July 2024 confirmed that when the owner died on or after the required beginning date, the ten-year beneficiary must also take annual distributions in years one through nine; the preamble states that “the final regulations do not eliminate the requirement for continued annual distributions if an employee dies on or after the employee’s required beginning date.”

Two consequences for the designation form follow. First, name individuals, or a trust drafted to qualify as a designated beneficiary, and never the estate or “as per my will.” Second, name contingents, because a spouse who is primary beneficiary and dies first leaves the account with no designated beneficiary at all unless the children are on the form.

Employer plans carry one more rule. Under 29 U.S.C. 1055(c)(2), a married participant in a plan governed by ERISA may name someone other than the spouse only if “the spouse of the participant consents in writing to such election” and the consent “is witnessed by a plan representative or a notary public.” That requirement applies to pension and 401(k) plans, not to IRAs, which are not employer plans. A second spouse named on a 401(k) without the first spouse’s consent, or a child named without the current spouse’s consent, may find the designation void.

What If a Beneficiary Is a Minor?

A life insurer or plan administrator will not pay a child. Without planning, a court appoints a guardian of the property or the funds are held under court supervision until the child comes of age. The simpler route is to name a custodian for the child under the state’s Uniform Transfers to Minors Act on the beneficiary form itself, which every state permits. The age at which the custodianship ends is not the same for every transfer. Connecticut’s General Statutes 45a-559e ends every custodianship at “the minor’s attainment of twenty-one years of age.” New Jersey defines a minor as a person under 21 for these purposes. New York’s EPTL 7-6.20 ends a custodianship at 21 for property transferred by gift or by will or trust, but at 18 for property transferred by a fiduciary or by an “obligor,” which is how an insurer or plan administrator paying a beneficiary designation is classified. A New York parent who names a custodian for a child on a life insurance form should expect the child to receive the money at 18.

For larger sums, or for any parent who does not want an 18- or 21-year-old to receive a lump sum, the better contingent beneficiary is a trust for the child created in the parent’s will or revocable trust, with the beneficiary form naming the trustee. Our article on trusts for grandchildren describes how such trusts hold assets past majority.

What If a Beneficiary Is Disabled?

An inheritance paid directly to a person receiving Supplemental Security Income or Medicaid can end those benefits until the money is spent. The contingent beneficiary for a disabled child should be a supplemental needs trust, not the child. A trust created by a parent with the parent’s own assets is a third-party trust and need not repay Medicaid. If the disabled person’s own assets must be placed in trust, federal law at 42 U.S.C. 1396p(d)(4)(A) permits a trust “containing the assets of an individual under age 65 who is disabled” and “established for the benefit of such individual by the individual, a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual.” The distinction matters, and the beneficiary form should name the right trust.

How Do Divorce and Remarriage Change the Answer?

New Jersey and New York revoke a former spouse’s designation automatically. New Jersey’s N.J.S.A. 3B:3-14, titled “Revocation of probate and non-probate transfers by divorce or annulment,” revokes “any revocable dispositions or appointment of property made by a divorced individual to his former spouse in a governing instrument,” which includes beneficiary designations. New York’s EPTL 5-1.4 revokes any revocable disposition to a former spouse made “by will, by security registration in beneficiary form (TOD), by beneficiary designation in a life insurance policy or (to the extent permitted by law) in a pension or retirement benefits plan, or by revocable trust.” Connecticut’s General Statutes 45a-257c revokes only dispositions “made by the will to the former spouse”; we have found no Connecticut statute revoking a beneficiary designation on divorce, so a Connecticut resident who forgets to change the form may leave the policy to a former spouse.

None of these statutes reaches an employer plan governed by ERISA. In Egelhoff v. Egelhoff, decided in 2001, the Supreme Court held that ERISA “pre-empts” a state statute revoking a former spouse’s designation “to the extent it applies to ERISA plans.” A 401(k) still naming a former spouse pays the former spouse. The form must be changed.

The contingent beneficiary is where a second marriage shows. A parent who names a new spouse as primary and the children of the first marriage as contingents has, on the parent’s death, left everything to the new spouse, whose own beneficiaries will take the rest. Children of a first marriage are protected only by a trust, or by dividing the primary designation between spouse and children in stated percentages. Our article on what a surviving spouse is entitled to explains the spousal rights that apply regardless of the form.

How Should You Review Your Designations?

• List every asset that passes by designation: retirement accounts, life insurance, annuities, transfer-on-death brokerage accounts, payable-on-death bank accounts, and, in New York since 2024, real estate under a transfer-on-death deed authorized by Real Property Law 424, which requires two witnesses, a notary, and recording “before the transferor’s death.” New Jersey and Connecticut have not enacted a transfer-on-death deed law.
• Get the current form from each institution rather than relying on memory. Custodians lose forms, and a merger can leave an account with no designation on file.
• Name a contingent on every one, and make sure the primary and contingent together add up to a plan that still works if any one person dies first.
• Say what happens to a deceased beneficiary’s share in words the form supports, and confirm with the custodian how it reads “per stirpes.”
• Never name the estate, a minor directly, or a disabled beneficiary directly. Name a trust, a custodian, or the right supplemental needs trust.
• Coordinate with the will and any trust, so that assets passing by designation and assets passing by will produce the intended shares in total. A will that equalizes among children is defeated by an IRA that goes to one of them.
• Repeat after every marriage, divorce, birth, and death, and at least every few years.

Plan Well. Live Better.

The contingent beneficiary line is the smallest space on the form and the one most often left blank. At Milvidskiy Law Group, we review every beneficiary designation as part of an estate plan, draft the trusts that should be named on them, and make sure the forms and the will tell the same story. Learn more about our estate planning services.

This article is for general informational purposes only and does not constitute legal or tax advice. Reading it does not create an attorney-client relationship. The treatment of a beneficiary designation depends on the account agreement, the form, the state, and the asset. The New Jersey, New York, Connecticut, and federal statutes, the 2024 Treasury regulations, IRS Publication 590-B, and the court decision described were verified in September 2026 and should be confirmed before relying on them.