What Happens If A Beneficiary Dies Before Receiving An Inheritance?

When the beneficiary of a deceased person’s probate estate or living trust dies during the course of administering the estate and before the full distribution of the inheritance has been made, things can get sticky and complex.

Let’s say a mother dies and her estate is in the process of being probated when her son dies. The son’s estate can claim his inheritance, which it will in turn distribute to the beneficiaries of his estate, according to a recent article, “Beneficiary dies prior to receiving inheritance” from the Lake County Record-Bee.

This might require probating the deceased child’s estate. Whether or not a probate is required depends if the son had any probate assets, that is, owned an asset in his own name. If the son owned all of his assets with a spouse, either as tenants by the entirety or as joint tenants with rights of survivorship, or transferred his assets at death or during his lifetime to a living trust, then a probate would not be necessary. If, however, the son has probate assets but the total value of the probate estate does not exceed $25, 000, a small estate could be administered in Massachusetts by using a voluntary administration that is time efficient.

Whenever a decedent is single or widowed at the time of his or her death and owns a house or bank account in his or her own name, or holds title to joint property as tenants in common, probate is likely. These scenarios illustrate the benefits of holding assets in a living trust, and, provided that the assets are transferred to the living trust during the son’s (using the example above) or the decedent’s lifetime or transferred on death, probate is avoided.

Any time property is worth more than $25, 000, it makes sense for the owner to hold title to the property in a trust.

Returning to our example above, who will then, inherit the son’s estate? If he had a last will and testament, it is the governing document. If he had a revocable living trust, then he likely will also have a “pour-over will, ” which “pours” everything over in the estate to the revocable living trust, and the trust provisions will determine who will inherit his stuff and the the assets that he would have inherited from his mother had he been alive at the time of her estate’s distribution.

Without a trust and proper funding or transfer of assets to the trust, it’s likely the son’s last will and testament will need to be probated and his heirs identified. With no will and no trust, the son will have died intestate, which means that the son’s heirs inherit according to the laws of intestate succession. The intestate laws are the state’s rule of inheritance, and not yours.

If the estate has been planned properly, even the complex situation described above will be more manageable. If neither the mother nor the son had an estate plan, it could take many years to unravel the estate. An estate planning attorney can create a plan that is designed with the laws of your state in mind and address many unexpected situations.

Reference: Lake County Record-Bee (December 7, 2019) “Beneficiary dies prior to receiving inheritance”