Beneficiary designations: five sub-items, one section

Pearson gives most provisions a single line. This one gets five sub-items, which is the outline's way of telling you it matters. Each sub-item answers a different awkward question about who receives the money.

Primary and contingent

The primary beneficiary is paid if living at the insured's death. If not, the contingent beneficiary takes. A third layer, sometimes called tertiary, works the same way. Nothing about this is difficult until a stem introduces two primaries and asks what happens when one has died: the surviving primary takes the whole benefit, and the contingent gets nothing, because contingents only inherit when no primary survives.

Revocable and irrevocable

That middle block is the examinable part. An irrevocable designation does not just freeze the beneficiary, it restricts the owner's other rights too, because those rights could be used to hollow out the beneficiary's interest. Borrowing against the policy reduces what is paid, so the beneficiary gets a say.

Common disaster

The insured and the beneficiary die in the same accident, and the order of death is unclear or very close. Without a provision the proceeds might pass through the beneficiary's estate to people the insured never intended. A common disaster clause presumes the insured survived, so the contingent beneficiary takes instead.

A stem describing a car crash in which both die is pointing here nine times in ten.

Minor beneficiaries

Insurers do not pay a large sum directly to a child. Without arrangements, a court has to appoint a guardian of the estate, which is slow and costs money out of the proceeds. The usual fixes are a trust, a custodial arrangement, or naming an adult guardian in the designation. The exam wants you to know the problem exists and that naming a minor without providing for it creates delay, not that you can draft the solution.

Designation by class

Naming a group rather than individuals: my children, or my surviving children. This is where per stirpes and per capita arrive.

• Per capita divides the benefit among surviving members of the class, so a deceased child's share goes to their surviving siblings.
• Per stirpes divides by branch of the family, so a deceased child's share passes down to that child's own children.

By branch, or by head. Stirpes for branch, capita for head, and the Latin is doing exactly what it says. That is worth two seconds of mnemonic and it converts a scenario question into a definition question.

The Texas angle

The Texas life-only section lists designation of beneficiary, transfer and assignment of a policy with a reference to TIC 1103.055, and the Code also has provisions on life insurance proceeds paid to a trustee. So beneficiary questions can arrive from either portion. The general portion asks how designations work. The Texas portion asks what Texas requires the policy to allow.

The opinion, and the concession

Learn per stirpes and per capita properly, and let the rest of this provision sit at the level of recognition. Five sub-items sounds like a lot of study; four of them are one paragraph each and the fifth carries a genuine distinction that a stem can build a scenario on. Where the outline gives you sub-items, it is telling you the shape of the question, not the volume of the reading.

The concession: what happens when a designation is ambiguous, or when a divorce decree conflicts with it, is decided by courts and by the Family Code rather than by the Insurance Code. We hold the Insurance Code. Where the answer lies outside it, this page says the question exists and does not pretend to settle it.