Can Annuities Have Primary Beneficiaries and Contingent Beneficiaries?

Although annuities are retirement investment products, they are managed by life insurance companies and contain provisions that allow owners to specify beneficiaries. The annuity owner is free to specify any number of primary and contingent beneficiaries, and he can add, remove or otherwise change those designations at any time.

Primary Beneficiaries

Primary beneficiaries are the annuity owner's first choice for who should receive any remaining money in the account after he dies. Annuity owners must specify at least one primary beneficiary, although no limit exists on the number of beneficiaries that can be chosen. Owners may also specify how the money shall be divvied between beneficiaries. Business entities and charitable organizations may also be listed as beneficiaries, but inanimate objects and pets do not qualify.

Contingent Beneficiaries

Contingent beneficiaries are the annuity owner's choices for who should receive the money if the primary beneficiary dies or does not accept the money. No contingent beneficiary will receive money if a primary beneficiary remains alive and accepts the money. There are no restrictions or limitations regarding the number of contingent beneficiaries an annuity owner may specify, or how the money should be divided among them.

Per Stirpes

Most life insurance companies allow annuity owners to list any beneficiary as "per stirpes." This term indicates the account owner's desire to have that particular person's share of the proceeds pass to his own heirs if he predeceases the annuity owner. Adding the per stirpes designation ensures that money intended for a beneficiary will still benefit his family even if he dies before actually receiving the inheritance.

Annuities Without Beneficiaries

Annuity contracts without beneficiaries are paid to the original account owner's estate after his death. The value of the annuity gets included in estate and inheritance tax calculations, which for very large estates may result in additional taxes due. Including at least one primary and one contingent beneficiary is typically in the annuity owner's best interest, as is ensuring that those designations remain current and in line with his goals and final wishes.

About the Author

Gregory Gambone is senior vice president of a small New Jersey insurance brokerage. His expertise is insurance and employee benefits. He has been writing since 1997. Gambone released his first book, "Financial Planning Basics," in 2007 and continues to work on his next industry publication. He earned a Bachelor of Science in psychology from Fairleigh Dickinson University.

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