An Alternate Beneficiary is an individual or entity designated to receive benefits from a trust, will, or insurance policy in the event that the primary beneficiary is unable or unwilling to accept those benefits.
In estate planning, the designation of an Alternate Beneficiary is crucial for ensuring that assets are distributed according to the grantor’s wishes, even if circumstances change. For example, if a primary beneficiary predeceases the grantor or renounces their inheritance, the Alternate Beneficiary will step in to receive the assets.
In practice, if a person names their child as the primary beneficiary of their life insurance policy but also names a sibling as an Alternate Beneficiary, the sibling will receive the insurance payout if the child passes away before the policyholder. This mechanism provides a safeguard against asset distribution uncertainties, ensuring that the grantor’s intentions are respected and that the assets are not left in limbo.
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