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A primary beneficiary is the recipient of the money or possessions when the holder of an insurance policy, investment account or type of assets dies. The beneficiary is the first and only person or organization that receives these possessions. If the primary beneficiary has also passed away, then a contingent or back up beneficiary would be the recipient of the items left by the policy or asset account holder.
There are several instances where a primary beneficiary must be designated by the holder of the asset. Some of the instances when a beneficiary must be named include a will, trust, insurance policy or an investment or asset account. Each individual account can have its own beneficiary. For example, a primary beneficiary for a man’s insurance policy may be his wife. The beneficiary of his investment account may be his son and the beneficiary for the will, which names all of the other specific assets the beneficiary may receive, may be the daughter.
When choosing a primary beneficiary, the holder of the account or the asset has four primary categories from which to choose. A beneficiary can be an individual, a trust account, the estate of the person that passes away or a combination of these three beneficiary options.
When an asset account or will is opened or created, the company or attorney will provide a beneficiary form for the holder of the will or policy to name a beneficiary. Since a will may cover numerous beneficiaries, there may not be one primary beneficiary. Instead, a beneficiary may be assigned for each item that the will maker wishes to leave that person.
For example, the primary beneficiary of the home the person owns may go to a spouse. This means that the spouse becomes the primary and only owner of the home once her husband passes away. The will maker may make the beneficiary of his gold coin collection one of his nieces. In a will situation, there may be a primary beneficiary assigned for each asset or item that the will maker wishes to leave or bequeath to loved ones or others.
The primary beneficiary may need to be changed over the years. As marriages, divorces and the births of children occur, the primary beneficiary of the assets may change as well. Experts suggest that asset and policy holders assess these beneficiaries on an annual basis or at least when major life changes occur.
What happens when the agent does not show you who is the primary beneficiary on a policy?