What Happens to an Inheritance If a Beneficiary Has Died?

If your named heir dies after you’ve written your will, but before they receive their inheritance, the outcome depends entirely on your state’s laws. We’ll outline some of the most common scenarios, but keep in mind that estate and property laws vary significantly by state. To ensure your estate plan aligns with your specific needs, it’s a good idea to consult a qualified attorney or financial advisor.

What Happens If You Die Intestate?

When discussing beneficiaries, it’s important to consider what happens if someone dies without a will – known as dying intestate. In this case, state laws, rather than personal wishes, determine how assets are distributed. Typically, assets pass to the closest next of kin, starting with a spouse, then children, siblings and extended family members.

Under most state laws, intestate succession follows a strict order based on surviving relatives. The court searches for the nearest living relative, and if a closer relative has already passed away, their estate or heirs do not inherit in their place.

For example, if your state prioritizes spouses first and then children, and your spouse passes away before you, their heirs or family members would have no claim to your estate. Instead, your assets would go directly to your children, if you have any.

Lapsed Gifts in a Will

When your will leaves assets to a beneficiary who is, themselves, dead, this is called a “lapsed devise.” Since they’re dead, your named beneficiary cannot inherit. From here, state law dictates who takes these unclaimed assets. This leads to two common outcomes that depend on the specific laws of your state and the circumstances of the inheritance.

Trail of Estate

In many states, the assets will become part of the deceased beneficiary’s estate. This is based on what are called “anti-lapse” laws, meaning laws that specifically address the issue of a lapsed devise. The assets that would go to your beneficiary instead go to their heirs based on the terms of their will or (if they died intestate) state law.

This can occasionally lead to a domino effect if the beneficiary’s heirs have, themselves, died. In that case, the inheritance will continue to pass along as state law and will terms required until the assets reach a living person.

However, the details of anti-lapse laws vary widely. In some states, the assets pass fully to your beneficiary’s estate no matter who they are. In others, anti-lapse laws only apply if the deceased beneficiary was a blood relative or even someone as close as a child or sibling. Still, others may restrict who can inherit from the deceased beneficiary in turn.

The general rule of thumb for anti-lapse laws is this: If the beneficiary is dead and anti-lapse laws apply, the beneficiary’s heirs inherit the assets. The specific application of these laws, however, can be entirely different from state to state.

Residuary Distribution

If no anti-lapse laws apply, then the assets revert back to the estate. They then pass as a standard residuary. This means that the assets have no clear heir under your will, the same as if you had not named a beneficiary at all. From there, the property will typically move in two ways:

Your residual beneficiary will inherit if you have one. A residual beneficiary is the person or persons you named to inherit any unclaimed assets in your will. In most wills, it’s a good idea to have one and naming a residual beneficiary can be as simple as just adding “all else to this individual.” At the end of the will’s distributions, if there are any remaining assets, this person claims them.
If you have no legitimate or living residual beneficiary, state law applies. When a will has residual benefits and no heir to claim them or if the residual beneficiary themselves has died, typically states distribute the property under their intestacy laws. This means that those specific assets pass to your heirs as defined by state law just as if you had no will at all.

Alternates, Survivorship And Joint Inheritance

Heirs review a will to determine who inherits if a beneficiary dies.

There are several exceptions to these rules. The three most common are alternate heirs, survivorship and joint inheritance.

Alternate Heirs

In your will, you can name alternate heirs to receive the property if the primary beneficiary cannot. For example, you might leave a bequest along the lines of “Sally inherited my house. If she cannot inherit, then the house will pass to Richard.” In this case, as the primary beneficiary, Sally inherits your house. However, if Sally dies before she could inherit, then Richard would inherit the house. If he also dies, then lapse and residuary laws would apply and would follow the primary beneficiary (here, Sally).

Survivorship

A survivorship requirement states that the beneficiary of a will cannot inherit unless they survive the deceased for a minimum amount of time. For example, a survivorship requirement might say that a beneficiary cannot inherit unless they outlive the deceased by at least 30 days. A survivorship requirement can delay the close of probate since an estate cannot close until it has distributed all of its assets.

If the beneficiary dies before meeting the terms of a survivorship requirement, it’s treated as though they died before inheriting. The same rules apply, meaning that the assets would pass first to any alternates, then to any lapsed devise or residual heirs and finally through state inheritance law. Survivorship requirements can be applied by state law or by the terms of the will itself.

Joint Inheritance

Finally, assets in a will can be left to multiple beneficiaries as a group. For example, you might say that a pool of money is to be split equally among your children. Or you might leave a single house for three family members to share.

When assets are left to a group and one member of that group dies, the matter is decided by the wording of the will. Say the will leaves its assets to a generally defined group, for example, “my children” or “my siblings.” If one member of that group dies, the remaining heirs will split the assets among themselves.

However, if the will leaves its assets to specifically named members of a group, for example “to Alex, Robert and Julie,” then if one member of the group dies, the assets will be treated as a specific inheritance with a beneficiary’s death. In this example, if Alex dies before inheriting, then the analysis will follow the same process as discussed above, with the law first looking for a named alternate, then reviewing the state’s laws on lapsed devices and finally distributing Alex’s share based on the state’s intestacy laws.

Bottom Line

A couple write their will, preparing to decide who inherits if a beneficiary dies.

If a beneficiary to a will dies before they can inherit, the results can range widely. The assets might travel to the beneficiary’s heirs in a chain of inheritance, they might proceed to the will’s residual heir or the state might handle them as intestate assets. It depends entirely on the circumstances of the will and the laws of the individual state.

Estate Planning Tips

A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
The best way to avoid these issues is by writing your will thoroughly and with care. Here’s how you can do exactly that.