Depending on the language in your will and your state law, several scenarios can happen if a beneficiary dies before you. A beneficiary is a person you designate to receive property or benefits from your estate after you die. Specific gifts in your will (jewelry, cars, etc.) and life insurance policies are two assets that typically have beneficiary designations. Choosing the family members and loved ones you want to inherit your property when you pass away is one of the key purposes of estate planning.
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When a beneficiary dies before you, you should update your will or policy to add a new beneficiary. If life gets in the way and you don’t get around to replacing a deceased beneficiary before your own death, the question becomes who inherits the property after you pass away. This article explains how the language of your will (or the set-up of your life insurance policy) and state law often determine how your property gets distributed when a beneficiary dies before you do.
What Happens if a Beneficiary of a Will Dies?
When a person dies with a will, the personal representative submits the will to probate. During the probate process, the decedent’s estate is distributed according to the terms of the will. Typically, specific gifts go to the named beneficiaries in the will. If the designated beneficiary of a gift in the will dies before the testator (the will-maker), state law and the language of the will determine who inherits the gift.
When There Is No Contingent Beneficiary
When making an estate plan, you should name both a primary and contingent beneficiary for each gift in your will. A primary beneficiary is first in line to receive a gift from your estate after your death. A contingent beneficiary – sometimes called a secondary beneficiary – is the alternate named to receive the property in a will if the primary beneficiary dies before you, cannot be found, or refuses to take accept the gift. If you name contingent beneficiaries for the assets in your estate, the contingent beneficiary inherits the gift.
When no contingent beneficiary is named to receive an asset in your will, and the primary beneficiary passes away before you, the gift “lapses” or “fails.” Lapsed or failed gifts are dealt with in one of the three following ways:
- The property becomes part of the residuary estate and passes to the residuary beneficiary.
- An “anti-lapse” law protects the property and passes it to the deceased beneficiary’s descendants (such as children and grandchildren).
- The property passes to the will-maker’s heirs under state intestacy laws.
When There Is a Residuary Beneficiary
A person’s “residuary estate” includes all the property and assets in the estate that is not given to an heir or beneficiary under the terms of the will. A residuary beneficiary is a person you name in your will to receive the “residue” of your estate. Sometimes, when a gift to a beneficiary lapses, it too falls into the residuary estate. If your will states that lapsed gifts fall into the residuary estate and names a residuary beneficiary, the residuary beneficiary inherits the gift.
When an Anti-lapse Law Applies
Unless you live in Louisiana, your state has an anti-lapse law that may protect a lapsed gift from falling into the residuary estate. State anti-lapse statutes aim to distribute the lapsed gift to the person the testator would have wanted in place of the deceased person.
Under most anti-lapse statutes, the primary beneficiary’s children inherit the gift if certain requirements are met. The two general requirements for an anti-lapse law to apply are:
- The deceased beneficiary was the testator’s grandparent or a direct descendant of a grandparent (i.e., a parent, sibling, aunt, uncle, etc.), and
- The deceased beneficiary has surviving children.
Although state laws differ on the exact requirements for anti-lapse laws to apply, they usually don’t apply to deceased beneficiaries who aren’t blood relatives of the testator (such as a close friend or neighbor of the testator). Failed gifts not covered by a state’s anti-lapse statute either fall into the residuary estate or pass to the testator’s heirs under state intestacy laws.
When Intestacy Laws Apply
When a person dies without a will, the probate court applies the state’s intestacy laws to distribute the decedent’s property. Under intestate succession, the estate passes to the people defined as the decedent’s heirs under the state’s intestacy statute.
When a beneficiary of a will dies before the testator, if there is no contingent or residuary beneficiary and an anti-lapse law doesn’t apply, the testator’s heirs inherit the gift according to the intestate succession law of the state.
What Happens if a Life Insurance Beneficiary Dies?
Most life insurance policies let you make beneficiary designations. The death benefit from a life insurance policy with a designated beneficiary is a non-probate asset. This means the benefits do not pass under the will but are paid directly to the designated beneficiary on the policy when the policyholder dies. When the designated beneficiary on a life insurance policy dies before the policyholder, several scenarios may play out depending on how the policy is set up.
When There Is a Contingent Beneficiary
You can (and should) name contingent or alternate beneficiaries to receive the proceeds from your life insurance policy. When the primary beneficiary of a life insurance policy dies before you, the contingent beneficiary receives the payout (the same way as the contingent beneficiary of a gift in your will receives the gift if the primary beneficiary predeceases you).
When There Isn’t a Contingent Beneficiary
If you don’t designate a contingent beneficiary on your life insurance policy and the primary beneficiary dies before you, the death benefit goes to your estate. The executor of your estate distributes the proceeds along with the rest of your probate estate. The language of your will (as discussed above) will determine who receives the proceeds.
When There Are Multiple Beneficiaries
Many life insurance policies allow you to name more than one primary beneficiary and assign a percentage of the proceeds to each one. If one of the multiple primary beneficiaries dies before you, the policy proceeds are split among the remaining beneficiaries (or, in some cases, their descendants).
The distribution of life insurance proceeds can be either per stirpes or per capita. If there are two primary beneficiaries and one dies before you, under a per stirpes policy, the surviving beneficiary gets their intended share, and the deceased beneficiary’s share is divided equally among the deceased beneficiary’s descendants. Under a per capita policy, the proceeds are distributed equally among the surviving primary beneficiary and the descendants of the deceased primary beneficiary.
Still Need to Draft Your Will?
To avoid the negative consequences that may result when a beneficiary predeceases you, it’s important to draft a will with the appropriate safeguards. With FindLaw’s DIY Last Will and Testament Form, you can draft your will online without the time and expense of hiring an estate planning attorney. Our state-specific, customizable template lets you choose a primary and backup beneficiary for each specific gift you want to pass on in your will, so you know you’re covered if a beneficiary dies before you do.
If you need help dealing with the issue of a beneficiary predeceasing a testator, consult with a qualified probate attorney in your area. If you have further questions about drafting a will with alternate beneficiaries, seek legal advice from an estate planning attorney.