Naming Backup Beneficiaries in Your Estate Plan

Most people name a beneficiary in their estate plan, but fewer consider what happens if that person cannot inherit. Naming Backup Beneficiaries in Your Estate Plan helps ensure your assets pass according to your wishes if a primary beneficiary dies before you or is otherwise unable to receive the inheritance. This guide explains how backup beneficiaries work under Massachusetts law and why they can be an important part of estate planning. 

How Backup Beneficiaries Work in Massachusetts Estate Plans 

A backup beneficiary, also called a contingent beneficiary, inherits assets if your primary beneficiary cannot. This may happen if the primary beneficiary dies before you, disclaims the inheritance, or cannot be located when the asset is distributed.

Key things to know about backup beneficiaries include:

• Primary beneficiaries inherit first. A backup beneficiary only inherits if the primary beneficiary cannot receive the asset.

• Backup beneficiaries can be named on many assets. Wills, trusts, life insurance policies, retirement accounts, and payable-on-death (POD) accounts often allow contingent beneficiary designations.

• Beneficiary designations can override a will. Assets with designated beneficiaries typically pass according to the beneficiary form rather than the terms of a will.

• A missing backup beneficiary can create complications. Depending on the circumstances, assets may pass through probate or be distributed under Massachusetts law rather than according to your preferences.

• Some estate plans include multiple backup layers. In addition to a contingent beneficiary, you may also name a tertiary beneficiary if your circumstances warrant additional planning.

Massachusetts law includes an anti-lapse statute under M.G.L. c. 190B, § 2-603 that may preserve certain gifts when a beneficiary dies before you. However, the rule does not apply in every situation and may not protect gifts intended for non-relatives.

For LGBTQIA2S+, polyamorous, and other non-traditional families, clear beneficiary designations can be especially important. If a beneficiary designation fails or an estate plan contains gaps, Massachusetts law generally prioritizes legal spouses and blood relatives. As a result, a long-term partner, chosen family member, or close friend may not inherit in the way you intended. 

Beneficiary designations should be reviewed regularly. Marriage, divorce, births, deaths, and other major life changes may affect who should be named in your estate plan.

When Standard Beneficiary Rules Don’t Apply

Certain situations can affect how beneficiary designations work and may require additional planning.

Per Stirpes vs. Per Capita Distributions

If a beneficiary dies before you, assets may pass under a per stirpes or per capita distribution. Per stirpes, a deceased beneficiary’s share passes to that person’s descendants. Per capita divides the share among surviving beneficiaries. The difference can significantly affect who ultimately inherits.

Retirement Accounts and Life Insurance

Retirement accounts, life insurance policies, and similar assets pass according to beneficiary designations rather than the terms of a will. If no backup beneficiary is named, the asset may be paid to the estate or distributed under the account’s default rules.

Minor Beneficiaries

Minors generally cannot receive inherited assets directly. Naming a trust as a backup beneficiary may help avoid the need for court involvement and provide a structure for managing the inheritance.

Charitable Beneficiaries

Charities can merge, dissolve, or cease operations. Naming a backup charitable beneficiary can help ensure the gift is distributed according to your wishes if the original organization no longer exists.

How Do You Add Backup Beneficiaries to an Estate Plan?

Adding backup beneficiaries usually involves reviewing your existing estate plan and updating the documents or account designations that control how assets pass.

1. Identify Assets With Beneficiary Designations: Review wills, trusts, life insurance policies, retirement accounts, and payable-on-death accounts to determine where backup beneficiaries may be needed.

2. Review Existing Beneficiary Designations: Confirm that your primary beneficiaries still reflect your wishes and determine whether contingent beneficiaries have already been named.

3. Update Estate Planning Documents: If necessary, update your will, trust, or other planning documents to include backup beneficiaries.

4. Update Financial Accounts: Beneficiary designations for retirement accounts, life insurance policies, and similar assets are typically updated directly with the financial institution.

5. Review Your Plan Regularly: Beneficiary designations should be reviewed after major life events such as marriage, divorce, births, deaths, or significant changes in family relationships.

When to Talk to a Lawyer About Backup Beneficiaries

You may benefit from legal guidance if you have a blended family, a non-traditional family structure, minor beneficiaries, charitable gifts, or significant assets that require additional planning. It may also be worth reviewing your beneficiary designations after major life events such as marriage, divorce, the birth of a child, the death of a beneficiary, or significant changes in family relationships.

This can be especially important when your intended beneficiaries may not inherit under default Massachusetts inheritance rules. 

If you are unsure whether your beneficiary designations still reflect your wishes, consider speaking with an attorney about your options. DangerLaw, LLC can help you review your estate plan and identify potential gaps before they create problems.

Frequently Asked Questions

What Is a Backup Beneficiary in an Estate Plan?

A backup beneficiary, also called a contingent beneficiary, inherits assets if the primary beneficiary cannot. This may happen if the primary beneficiary dies before you, declines the inheritance, or cannot be located when the asset is distributed.

What Happens if I Do Not Name a Backup Beneficiary?

If no backup beneficiary is named, assets may pass according to the terms of your estate plan, the account’s governing rules, or Massachusetts law. In some situations, this can lead to probate or asset distributions that do not reflect your wishes.

Do Backup Beneficiaries Apply to Retirement Accounts and Life Insurance?

Yes. Many retirement accounts, life insurance policies, and payable-on-death accounts allow you to name both primary and contingent beneficiaries. These designations often control who inherits the asset.

Can I Name More Than One Backup Beneficiary?

Yes. You may name multiple backup beneficiaries and specify how assets should be divided among them. Some estate plans also include tertiary beneficiaries as an additional layer of planning.

When Should I Review My Beneficiary Designations?

You should review beneficiary designations after major life events such as marriage, divorce, the birth of a child, the death of a beneficiary, or significant changes in family relationships.