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What Happens If My Beneficiary Dies Before Me?

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What Happens If My Beneficiary Dies Before Me?

LAS Law: What Happens If My Beneficiary Dies Before Me?

When planning for death, most people assume they will die before their beneficiaries (e.g., their spouse, children, and grandchildren). While these assumptions are often well-founded, they do not always come to pass.

As experienced estate planning lawyers, we’ve come across cases where a primary beneficiary has died before the person leaving the inheritance. If this has happened to you, you may be wondering what is next. 

Who Is a Primary Beneficiary?

A ‘beneficiary’ is an individual or entity designated by the creator of an estate plan to receive their inheritance upon their passing. In fact, the presence of a beneficiary is often a prerequisite for the validity of many estate plans. It’s worth noting that beneficiaries encompass a wide spectrum, including not only individuals, but also organizations and various entities.

However, not all beneficiaries share an identical status. Primary beneficiaries are those who hold the foremost claim to inherit assets upon the demise of the estate’s creator. In essence, they stand as the first in line to receive their designated share. 

In contrast, a contingent beneficiary steps into the picture under specific circumstances, such as if the primary beneficiary passes away before the estate’s creator or if the creator’s whereabouts become unknown.

Death of the Primary Beneficiary

How does the passing of the primary beneficiary impact your original plans? Who inherits if a beneficiary dies? The truth is, it depends on a number of factors. Lawyers call this scenario having a predeceased beneficiary.

If a primary beneficiary has died, you must review your estate planning to see what accommodations, if any, exist. The review of, and any updates to, your estate planning documents are critical to ensuring your valuable possessions are distributed the way you would like them to be.

The details of your plan should outline the various accounts and property you own and how they are to be treated in the case of a predeceased beneficiary. Parsing through your accounts and property is key for navigating this situation. 

Failure to address a predeceased beneficiary in your plan could result in the state deciding the fate of your accounts and property, which may not serve your purposes and can ultimately leave your remaining beneficiaries sorting through a legal nightmare.

The most common scenarios when a primary beneficiary has died are that:

  • your estate planning documents are silent on the issue, or
  • your estate planning documents name contingent beneficiaries

There are important considerations to keep in mind in either instance involving a deceased
primary beneficiary.

Who Inherits If a Beneficiary Dies and Estate Planning Documents Are Silent?

An estate planning document is silent on the issue of predeceased beneficiaries if no contingent beneficiaries are identified. A contingent beneficiary is a backup, secondary beneficiary who receives an account or piece of property if the primary beneficiary dies before you do. 

So, what happens if a beneficiary dies and no contingent beneficiaries are named? The gift in question is canceled and the accounts and property will be considered part of your general estate and distributed according to the will in place through the legal process known as probate. 

In other words, the beneficiary’s portion is absorbed back into the estate and becomes part of the leftover or residuary estate. This cancellation can be problematic if the beneficiary has descendants who you would like to receive that portion of the inheritance.

Example: Adam has a daughter named Becky and Becky has three children. Adam’s will state that Becky will inherit Adam’s prized antique collection. If Becky dies before Adam, and if Becky’s children are not named as contingent beneficiaries, this could result in Becky’s children missing out on this gift.

Some states have enacted anti-lapse laws to protect against this result. In these jurisdictions, the heirs of the beneficiary will receive the gift. There are a few caveats and distinctions from jurisdiction to jurisdiction. Some states limit the heirs that can benefit from anti-lapse laws to those who are blood relatives. As a result, the outcome when an estate planning document remains silent will differ from situation to situation.

What Happens If a Beneficiary Dies and Estate Planning Documents Name a Contingent Beneficiary?

If your will or trust specifically names a contingent beneficiary, the result is fairly straightforward. The individual identified will inherit the beneficiary’s portion. However, if a specific name has not been identified, the assets may be distributed a few different ways depending on what stipulations, if any, were made in the original estate plan or what the default provisions of the applicable state law are.

  • Per Stirpes: In some cases, where the will or trust has not specifically identified to whom a specific asset should go, the distribution may be made per stirpes. A per stirpes distribution means that the next generation of the beneficiary receives that beneficiary’s share in equal amounts. One potential downside to this approach is that the spouse of the beneficiary may be left out of the distribution.
  • Per Capita with Representation: In other instances, a per capita distribution occurs. This type of distribution provides another option that leads to equity at each generation level. Essentially, the assets are divided by the number of heirs at the generation level. In other words, predeceased beneficiaries’ children will receive the same portion as their cousins if their parents are also predeceased.

The language of your estate planning documents should dictate how beneficiaries and their shares are to be treated. In most instances, it is prudent to revise your estate planning documents so that they accurately reflect your current wishes. Having up-to-date estate planning documents helps ensure that your wishes are clearly communicated to the people who will be involved in administering your estate, saving time, money, and stress for your loved ones during a difficult time.

Our Seasoned Estate Planning Lawyer Can Help

A comprehensive estate plan is crucial for safeguarding the interests and peace of mind of those you hold dear. It is a sure-shot way of ensuring their well-being even in your absence. Beyond its numerous advantages, an estate plan empowers your loved ones with valuable financial assets to navigate the uncertainties of life even when you’re no longer with them.

When designing your estate plan, there’s an implicit assumption that your beneficiaries will outlast you. Yet, life’s unpredictable twists may unfold, and your intended primary beneficiaries may not endure beyond you. 

It is critical to ensure that your planning is flexible enough to accommodate the many changes that occur in life and death. If you need help reviewing your documents to make sure your goals will be carried out as you would expect, schedule an appointment with the experienced estate planning lawyer at La Grasso, Adbo, and Silveri, PLLC. We’ll help you plan for the various life events that come your way. Call (586) 413-7777 or fill out our online form today!