At Jordan & White, we often hear questions about estate planning that go beyond just signing papers and filing forms. One of the most common and important questions is, “What happens if a beneficiary dies before I do?”
This is a situation that many people don’t think about, but it can have significant implications for your estate plan and how your assets are distributed. Understanding what happens in this scenario is essential to ensuring your loved ones are taken care of in the way you intend.
At Jordan and White, we are frequently asked what occurs in the event that a beneficiary passes away before an estateholder. This situation is often overlooked, but it has a significant impact on how your assets are distributed. Here’s what you need to prepare for this situation.
Beneficiary Designations
A beneficiary is simply someone you’ve named to receive certain assets after you pass away. This can be in a will, a trust, a life insurance policy, or even a retirement account. There are different types of beneficiaries, though. The primary beneficiary is your first choice—the person or persons you most want to leave your assets to. Contingent Devisee are a backup plan, stepping in to receive the assets if the primary beneficiary isn’t able to.
If you name your spouse as the primary beneficiary of your life insurance policy, and your children as contingent beneficiaries, your spouse will receive the payout upon your passing. But if your spouse passes away before you, the children (as contingent beneficiaries) would step in.
Note that beneficiary designations need to be kept up-to-date, as life changes can affect their appropriateness. Regularly reviewing and updating these designations is an important part of maintaining an effective estate plan.
The Default Rule: When a Beneficiary Dies Before You
If a beneficiary dies before the grantor (that’s you—the person leaving the assets), the general rule is that their share “lapses,” meaning it no longer goes to them or their heirs. Instead, it goes back into the estate and is distributed according to your will or Massachusetts’ intestacy laws, which govern how assets are divided if no will is in place. Without proper planning, this can lead to some assets going to individuals you never intended to inherit anything—or even to the state.
Let’s say you’ve left a portion of your estate to your sibling, but they pass away before you do. If your will doesn’t have a backup plan, their share may be redistributed among your remaining beneficiaries, or in some cases, go to a surviving spouse or child. Without clear instructions, this can lead to confusion or unintended consequences.
Anti-Lapse Statutes: Massachusetts’ Safety Net
To prevent these unintended outcomes, Massachusetts has what’s known as an “anti-lapse statute.” This law steps in when a named beneficiary dies before you and ensures their descendants (usually children) receive the inheritance. For example, if you leave your house to your daughter, but she passes away before you, the anti-lapse statute would pass her share to her children (your grandchildren).
Anti-lapse laws were designed to honor family ties and avoid disinheriting someone’s descendants unintentionally. However, these laws don’t apply to every kind of beneficiary. A recent Supreme Judicial Court (SJC) decision has narrowed the interpretation of the anti-lapse statute. They generally cover close relatives like children or grandchildren but may not cover distant relatives or non-family members. This is where careful estate planning becomes crucial, so you can specify exactly who should inherit your assets if your primary Devisee can’t.
Why You Need to Plan Ahead?
While Massachusetts law provides some protection through anti-lapse statutes, it’s important to remember that these laws only offer a default solution. The Uniform Simultaneous Death Act specifies a 120-hour survival period for inheritance purposes unless explicitly stated otherwise in the will.
The best way to ensure your wishes are carried out is to have a clear, detailed estate plan. This includes naming contingent Devisee for all of your major assets, from life insurance policies to retirement accounts. By doing this, you make sure there’s a clear plan in place no matter what happens.
Special Considerations: Simultaneous Death
Some unique situations can complicate estate planning further. For example, what happens if you and your beneficiary die at the same time, or if there’s uncertainty about who passed away first? In these rare cases, the state’s law has provisions that address simultaneous deaths, often requiring clear evidence to determine the order of passing.
Another consideration is the way assets are distributed. If you choose a “per stirpes” method, for instance, your assets will pass down to the descendants of your Devisee if they die before you. This means if you leave something to your child and they die, their children (your grandchildren) will automatically inherit their share. In contrast, a “per capita” method would distribute the assets equally among the remaining beneficiaries, regardless of their familial relationship.
What About Non-Probate Assets?
It’s also important to consider assets that don’t go through probate, like life insurance policies and retirement accounts. These assets pass directly to the named beneficiaries, regardless of what your will says. So, if a beneficiary dies before you, you’ll need to make sure these accounts are updated to avoid any confusion.
For example, if you have a retirement account with a named beneficiary who has passed away, the institution holding that account will follow its own rules for distributing the assets. Often, these rules are similar to probate laws, but it’s best to avoid uncertainty by regularly reviewing your beneficiary designations.
Need Help with Estate Planning?
Estate planning is about more than just protecting your assets; it’s about making sure the legacy you’ve built goes to the people you care about. At Jordan & White, we’ve been helping families for over 80 years, and we’re here to make sure your estate plan reflects your wishes, even in the face of life’s unexpected events.
If you have questions about what happens if a beneficiary passes away or you’re looking to update your estate plan, we’re here to help. Contact us today to schedule a consultation or call us at 978-744-2811, and let us assist you in protecting your family’s future.