The simple answer to the question of whether contingent beneficiaries are necessary is yes. When drafting estate planning documents such as wills, trusts and powers of attorney, it is easy for New Jersey residents to forget that there is a possibility that primary beneficiaries may pass away or become incapacitated first. However, the possibility does exist, and without contingent, or backup, beneficiaries, all of that careful estate planning could be for nothing.
Choosing contingent beneficiaries can also eliminate the need to redo estate planning documents. Many people want to draft and execute their estate planning documents once and not think about it again. Careful consideration of who will be both the primary and secondary beneficiaries up front can help that happen.
Choosing contingent beneficiaries can often be more difficult than choosing primary ones. For many people in New Jersey, it's easy to pick a primary beneficiary since it is usually a spouse or child. However, it can be problematic to choose a person to be the contingent beneficiary that can be trusted as much as the primary beneficiary. There is no right or wrong method in choosing this person, but the choice should be one that the maker of the will, trust or other estate planning document is comfortable with appointing.
There is also a caveat of choosing a minor child as the secondary beneficiary. While that child is a minor, it may be a good idea to appoint a guardian as a co-beneficiary. This may require some adjustment when the minor child becomes an adult, but it can be done. Regardless of who is chosen to be a contingent beneficiary, these secondary beneficiaries can be just as important.
Source: lifehealthpro.com, "Why contingent beneficiaries shouldn't be an afterthought," Tom Nawrocki, Aug. 1, 2013