When it comes to life insurance, beneficiaries are the people who will receive money from a policy when someone dies. While most people consider primary and secondary beneficiaries regarding life insurance, you can also include tertiary beneficiaries in a policy.
Tertiary beneficiaries provide an extra layer of protection for loved ones should something happen to both the primary and secondary beneficiaries before the funds have been distributed.
In this blog post, we’ll discuss what a tertiary beneficiary is, why it is essential, and provide examples of how it works. We’ll also explain alternative options that may be available if you do not want to include a tertiary beneficiary on your policy.
Why Is a Tertiary Beneficiary Important?
Regarding estate planning, a tertiary beneficiary is a person or entity who only receives assets upon the death of the primary and secondary beneficiaries. In essence, they are the “third in line” when it comes to distributing an estate.
It’s essential to have tertiary beneficiaries as part of your estate plan as they can help ensure that your legacy and wishes are carried out precisely as you intended them to be, even if something unexpected happens with the primary or secondary beneficiaries.
Plus, having multiple people you trust associated with your estate helps keep everyone involved accountable—which can be especially beneficial if an estate’s value has dramatically increased since its creation.
How a Tertiary Beneficiary Works
A tertiary beneficiary is listed as the third in line on a life insurance policy. For example, when looking at a life insurance policy with three beneficiaries, the primary beneficiary would receive most of the funds upon death. Then, the secondary beneficiary would be next in line to receive funds, and finally, the tertiary beneficiary would receive whatever is left over.
In addition to life insurance policies, tertiary beneficiaries can be listed on other accounts, such as bank accounts and investment portfolios. Usually, these accounts will have a designated percentage that each beneficiary is entitled to upon the death of the primary and secondary beneficiaries.
Here’s a real-world example of how a tertiary beneficiary would work in the case of accidental death:
Let’s assume a married couple, John and Jane Doe, have two children and want to ensure their family is taken care of should something happen.
In this case, they would list the children as primary and secondary beneficiaries on their life insurance policy, each receiving 50% of the funds upon death. They will then document a trusted relative or friend as a tertiary beneficiary to receive the remaining funds if something happens to both primary and secondary beneficiaries before the money is distributed.
Alternative Options for Beneficiaries
Several alternative options may be available if you do not want to include a tertiary beneficiary in your policy. You could, for instance, designate the funds as part of a trust fund to provide long-term financial security to your beneficiaries. This would allow the money to be used in specific ways, such as college tuition or significant expenses.
Alternatively, you could designate the funds to a charity or organization close to your heart. While this is not a way to provide financial security for your beneficiaries, it can be a great way to ensure that your legacy continues even after you are gone.
Finally, you could set up an annuity for periodic payments over time so that your beneficiaries receive regular income from the policy. With this option, you can designate the amount and frequency of payments and specify how the money should be used.
No matter what option you choose, it is essential to think carefully about your beneficiaries and make sure that you have a plan to distribute your assets in a way that reflects your wishes after death.
Secure Your Financial Future
Having a tertiary beneficiary as part of an estate plan is critical to ensure that your legacy and wishes are carried out precisely how you intended them to be, even if something unexpected happens with the primary or secondary beneficiaries. It also helps keep everyone involved accountable for distributing assets after death.
To determine the appropriate tertiary beneficiary for an insurance plan, individuals should consult with a financial advisor or insurance agent who will guide them through their options and help them make an informed decision. Additionally, individuals should carefully review the terms and conditions of their insurance policy to ensure a complete understanding of how benefits are paid out and to whom.
If you’re looking for help knowing who should be listed as a tertiary beneficiary on life insurance policies, bank accounts, investment portfolios, trust funds, and more. Our team here at Alia Quotes can provide our expert guidance. Schedule a call or contact our team of experienced professionals to get a free life insurance quote and review the options available to you. We can assist you in making sure your family’s financial future is secured.
What are the 3 types of beneficiaries?
The three types of beneficiaries typically referred to in financial or legal contexts are:
What is a contingent vs tertiary beneficiary?
These are the individuals or entities named as the backup beneficiaries in case the primary beneficiary is unable or unwilling to receive the assets or benefits. Contingent beneficiaries will only receive the assets or benefits if the primary beneficiary predeceases the account owner or is otherwise unable to receive the assets.
Tertiary beneficiaries receive the assets or benefits if both the primary and contingent beneficiaries are unable or unwilling to receive them. However, not all financial or legal instruments include tertiary beneficiaries.
Can you have 3 primary beneficiaries?
Yes, it is common to name more than one primary beneficiary to ensure that the assets or benefits are distributed according to the account owner’s wishes and to provide a backup plan in case one of the primary beneficiaries is unable to receive the assets.
It’s important to note that the order of primary beneficiaries matters since the assets will be distributed according to the designated order.