Why should I name a contingent beneficiary and not just a primary one?

A contingent, or secondary, beneficiary inherits if your primary beneficiary has died or declines the asset. Skipping this step is a frequent oversight. If your only named beneficiary predeceases you and there's no backup, the account typically defaults to your estate and must pass through probate, adding cost, delay, and public exposure. It can also expose the money to creditors and disrupt tax advantages, such as the ability of a beneficiary to stretch inherited-IRA withdrawals. Naming contingents on every retirement account, life insurance policy, and transfer-on-death registration ensures a smooth handoff no matter the order of deaths. Review these backups whenever your family circumstances change, since a beneficiary who was appropriate years ago may no longer be.