A contingent beneficiary is a person alternatively named to receive the benefits in a will or trust. It also refers to a person who benefits only upon the happening of a condition precedent that is implicitly or explicitly expressed in the benefit.
A trustee has a duty to fulfill its obligations to all the beneficiaries, including contingent beneficiaries who would receive the benefit if the current beneficiaries’ interests are terminated. When a trustee breaches one’s duties, a contingent beneficiary may also have the right to sue the trustee.
- For example, in Giagnorio v. Trust, the court held that the contingent beneficiary had standing to sue a trustee who breached one’s fiduciary duties because the trustee has the same obligations to a contingent beneficiary as to a beneficiary with vested interest.
In insurance contracts, a contingent beneficiary is one who benefits when the prior beneficiary of the policy is unable to receive the benefit.
In Texas, if a beneficiary of a life insurance forfeits one’s interest in the policy, the contingent beneficiary named by the insured can receive the proceeds. However, if the contingent beneficiary forfeits one’s interest in the policy, the contingent beneficiary is not eligible for the benefit. When there is no contingent beneficiary who is entitled to the benefits, the proceeds go to the nearest relative of the insured.
When the primary beneficiary intentionally and unlawfully kills the insured, under the Slayer Rule most courts will award the benefits to the innocent contingent beneficiary or the insured’s estate.
See e.g., Doyle v. Sullivan, 176 A.D.2d 55, 580 N.Y.S.2d 601 (N.Y. App. Div. 1991)
[Last updated in September of 2022 by the Wex Definitions Team]