A “tertiary beneficiary” is a person or entity designated in an insurance policy or financial account to receive the benefits or proceeds if both the primary and secondary beneficiaries are unable to do so. This designation is part of a comprehensive estate planning strategy, ensuring that the policyholder’s or account holder’s assets are distributed according to their wishes, even if unforeseen circumstances affect the primary and secondary beneficiaries.
Key aspects of a tertiary beneficiary include:
Order of succession
The tertiary beneficiary is third in line to receive benefits, following the primary beneficiary, who is first in line, and the secondary (or contingent) beneficiary, who is second. The tertiary beneficiary only receives the benefits if both the primary and secondary beneficiaries are deceased, unable or unwilling to accept the benefits.
Flexibility in designation
Tertiary beneficiaries can be individuals, such as family members, friends, or even a guardian for minors, or entities, such as charities, trusts, or organizations. This allows for greater flexibility in estate planning and asset distribution.
Legal protection
Designating a tertiary beneficiary provides an additional layer of legal protection and clarity for the distribution of assets, reducing the likelihood of disputes among potential heirs or the assets being distributed according to the laws of intestacy.
Estate planning tool
Including a tertiary beneficiary is a prudent estate planning measure, ensuring that the policyholder’s or account holder’s intentions are honoured and that their assets are distributed to their chosen beneficiaries under various circumstances.
Revocable designations
Like primary and secondary beneficiaries, the designation of a tertiary beneficiary is typically revocable, meaning the policyholder or account holder can change it at any time, unless the designation is made irrevocable by specific legal agreement. In Quebec, naming your married or civil union spouse as beneficiary of an insurance policy (other than in a will) is irrevocable unless you state otherwise.