Tertiary beneficiary – a person or entity who occupies the third level in succession of beneficiaries and is designated to receive assets or life insurance proceeds provided that the primary and contingent (secondary) beneficiaries predeceased the testator or the insurance holder (H.W. Rubin 2000, p. 518).
However, due to the possibility of including so-called survivorship provisions in the last will or life insurance, a tertiary beneficiary is a person or entity entitled to inherit assets or life insurance proceeds if he or she outlives the primary and secondary beneficiaries upon the moment when the last will becomes legally effective or the sum of insurance is to be paid out. Therefore, it means that the beneficiaries become entitled to obtain estate or the policy sum providing that the survivorship period ends, not if they outlive the testator or policyholder.
What is also worth noticing is the fact that the word tertiary does not indicate that the person stipulated as beneficiary is the third of all beneficiaries because it is possible to name more than one person to be primary or secondary beneficiary e.g. William Smith designates his wife, Ann, to be primary beneficiary, his children, Mary and John, to be secondary beneficiaries, and his parents, Hannah and George, to be tertiary beneficiaries (D. Senger 1981, p. 29).
"Per capita" and "per stirpes" designation
Imagine such a situation in which William Smith e.g. purchases a life insurance policy and designates his wife, Ann, to be primary beneficiary, and his children, Mary and John, to be secondary beneficiaries and there is no survivorship provisions included in the policy. Mary does not have children on her own yet and John has a son and a daughter.
Supposing that William's wife and son die before him, Mary will receives the whole sum of the life insurance unless William stipulated in the policy provisions that the insurance proceeds should be divided in accordance with one of the following designations:
- Per capita (meaning for each head) – proceeds are to be divided equally among all survivors.
- Per stirpes (meaning through the root) – each branch of the family is to receive an equal share of the proceeds.
Therefore, if William stipulated that the proceeds are to be divided per capita then, in the example described above, Mary and John's surviving children will receive one third of the insurance proceeds each. However, if it was specified that the proceeds are to be split per stirpes then Mary will obtain half of the proceeds and John's surviving children will obtain one fourth each because Mary is one branch and John's children are the other branch of the family (D. Senger 1981, p. 30; BISYS Group 2013, p. 195-196).
- BISYS Group (2013), Life and Health Insurance License Exam Cram, Que Publishing, Indianapolis, Indiana
- Marcinko D.E. (2006), Dictionary of Health Insurance and Managed Care, Springer Publishing Company Inc., New York, New York
- Reiff M.R. (2005), Punishment, Compensation, and Law: A Theory of Enforceability, Cambridge University Press, New York, New York
- Rubin, H.W. (2010), Dictionary of Insurance Terms, Barron's Business Guides, Hauppauge, New York
- Senger D. (1981), Who will collect on your life insurance?, "Kiplinger's Personal Finance Magazine The Changing Times Vol.35, No.6", Kiplinger Washington Editors, Inc.
Author: Maksymilian Piaskowski