What Happens if One Primary Beneficiary Dies?


A thorough estate plan is critical to protecting loved ones and providing peace of mind. When a person creates an estate plan, they are assuming their beneficiaries will outlive them. Unfortunately, this is not always the case.

From this issue arise many questions. The most common question being is, “Who inherits if the beneficiary has passed away?” In this article we will explore this question and define some terms along the way.

What is a Beneficiary?

A beneficiary is anyone who the creator of an estate plan has named in their estate plan who will ultimately receive an inheritance from them upon their passing. Beneficiaries are a critical portion of every estate plan as they are an integral reason to creating the estate plan. The whole reason of taking the time to create an estate plan is so you can name beneficiaries to inherit from you.

In a comprehensive estate plan, there will be different types of beneficiaries – primary beneficiaries as well as contingent beneficiaries. Further, not all beneficiaries have to be individuals, or classes of individuals (i.e. grandchildren, etc.). They can also be organizations.

A primary beneficiary is the person or organization to inherit first from a trust or a will. Whereas a contingent beneficiary is the person or organization to inherit if the primary beneficiary is predeceased. Sometimes the contingent beneficiary is called a “second in line” beneficiary.

What Happens to a Will or Trust When a Beneficiary Dies?

When a beneficiary of a trust or a will dies the person who established the trust or had the will drafted should go back and amend their estate plan. Sometimes as estate planners we get asked, “If a beneficiary dies, does our estate plan no longer have effect?”

Although a beneficiary passing away is never planned for, a thorough estate plan should take this possibility into consideration. Further, even if the estate plan does not take this into account the estate plan will still be in effect, it will just be modified.

When naming beneficiaries for an estate plan, there are two common paths for their inheritance to take. Both paths consider the possibility of the beneficiary predeceasing the person who is creating the estate plan.

The first way to name a beneficiary is to say their inheritance “lapses.” What this means is that if the beneficiary passes away prior to the creator of the estate plan, the inheritance that was set to go to them is no longer in effect.

For example, if the person creating an estate plan had four children and the terms of the estate plan stated their inheritance were to lapse should they die prior to the creator, and the estate plan stated the children were to take equal shares of the estate, what happens if one of the children predeceases the creator? In this case, we have three living children, and they would each take a 1/3 share of the estate as their inheritance instead of a 1/4 share if their sibling had still been living.

The second way to name beneficiaries for an estate plan is to say their inheritance passes “per stirpes.” This is a Latin term and means “by branch,” which will make more sense shortly. The easiest way to think of a per stirpes designation is this: if a beneficiary dies before you do, their share of your estate will automatically and evenly go to their descendants, their children or child. If your estate is set up to be distributed “per stirpes” and a beneficiary dies, each named, living beneficiary would receive their original portion of your estate. Any descendants of the deceased beneficiary would split that portion of the inheritance equally.

What happens though if the deceased beneficiary has no children in an estate plan that utilizes per stirpes language? In that case, the inheritance would go as if it has lapsed, as described in the paragraph above.

The best plan is to amend an estate plan when a beneficiary dies before the person who had created the estate plan. But by utilizing the lapse and per stirpes language, estate planners can create a plan that considers the possibility of a primary beneficiary predeceasing the creator.

Alternate Beneficiaries Named in the Will or Trust

Another option outside of making an inheritance pass per stirpes or having the inheritance lapse should the primary beneficiary pass away is to name alternative beneficiaries in the will or trust. In this way, the creator of the estate plan can name multiple individuals in a descending order to inherit. This can sometimes be the best option depending on the situation of the intended beneficiaries as well as the goals of the person creating the estate plan.

An example of how to do this would be to name a beneficiary, for this example John Smith, then name alternatives should John predecease. So the estate plan could say, “John Smith to inherit 1/4 of my estate, should he predecease me Jane Smith should inherit in his place. Should Jane Smith predecease me . . . etc.” In this way, the creator of the estate plan is not relying on the inheritance to lapse or be passed per stirpes to the primary beneficiary’s children or child.

If There Are No Alternate Beneficiaries

So what happens if the will or trust does not name any alternate beneficiaries? Is the estate plan still in effect?

The good news on this is that the estate plan will still be in effect. The default for a situation where there are no alternate beneficiaries is that the inheritance lapses. This does raise the question concerning what happens if all the primary and alternate beneficiaries pass away at the same time. Although this is an exceedingly rare circumstance, it does occasionally happen. The most common of this very rare situation would be a plane crash where an entire family was on the plane.

So what happens in the situation where the entire family passes away in a single event? A comprehensive estate plan will also take this possibility into effect. Often this portion of the estate plan is called the “Common Disaster Distribution Plan.” In this provision of the estate plan the creator of the plan can choose what to happen if all the primary and alternative beneficiaries are deceased.

The two most common options for this portion of the estate plan are to name an organization such as a charity, research center, or religious group to receive the inheritance. The other common option is to say the inheritance should go to the creator’s “heirs at law.” This is a fancy way of saying the inheritance should go to the creator’s closest living relatives.

TuckerAllen’s Legacy Protection Program

At TuckerAllen we understand life is unpredictable. Because of this we have created the Legacy Protection Program.

When one of our clients signs up for the Legacy Protection Program, they get free attorney reviews of their estate plan as well as beneficiary and agent changes for free. This is especially helpful in the scenario where a beneficiary passes away before the creator of the estate plan. This allows the person whose loved one passed away to quickly and easily amend their estate plan to better fit their new circumstances.





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