Lapse: What Happens to Inheritance if the Beneficiary Dies?
August 2nd, 2021
A key part of your estate plan is your will. In addition to identifying who is in charge of handling your estate after your death, your will names who will inherit your property and assets. But what happens if that beneficiary dies before you do? For example, if you leave property to your brother Jim, but he dies before you, would his kids inherit the property in his place? The technical term for this situation is lapse. And the answer depends on the language in your will. To ensure your plan does what you want, it's best to have a will that's been drafted by an attorney who knows how to provide for multiple contingencies.
When No Contingency Exists
There are a lot of wills that fail to provide for a contingency in case a beneficiary dies before the testator (the person who made and signed the will). Most of these types of wills were drafted by someone trying to DIY a plan or by an attorney who does not focus on estate planning. (I see this much too often, especially in Texas. The consequences are often needless expense and delays.) In one recent instance, both the daughter and granddaughter died before the testator. The daughter's husband was still alive, and some in the family thought he should inherit. However, he had no rights of inheritance because his wife -- the testator's daughter -- died before her mother. Instead, this gift lapses and should pass according to any other residuary clause in the testator's will. Unfortunately, the testator's will had no residuary cause and no remote contingent beneficiaries listed. This meant that heirs had to be identified and found, just as if no will ever existed. In other words, the poorly-drafted will wound up costing the family more time and a lot more money during the probate process.
In most states, Texas and Florida included, the state has a law in place that helps provide for what happens if a beneficiary dies before you. Usually this is limited to family members of the testator and limits the new gift to descendants-- the children and grandchildren -- of the deceased beneficiary. For example, in the above example, if the gift were left to the daughter, but she died before her mother the testator, then unless the will said otherwise, the gift would go to the daughter's children. This, though, can also be problematic if the daughter's children are minors and the will did not contemplate what might happen if a minor inherited. (Often, this means a costly guardianship needs to be established to oversee the inheritance.) And anti-lapse laws also might over-complicate things with blended families or estranged families.
Planning for Lapse
The best way to make sure your wishes are in place and get carried out is to have a well-drafted will in place. When you work with McCreary Law Office, we will discuss all of the contingencies for what happens if your beneficiaries die before you. And your plan will reflect your personal preferences should any of those contingencies occur. (If you've done estate planning with me, this is why I always go through the "terrible-awful" possibilities with clients.)
It’s important to remember that estate planning is not “one and done.” You should update your plan every five years or so (or sooner if you or a loved one’s health changes) to account for any changes in the lives of your beneficiaries or if your goals have changed. Please contact McCreary Law Office or call the Jacksonville, FL office at 904-425-9046 or the Houston, TX office at 713-568-8600.