What Happens to an Inheritance If a Beneficiary Has Died?

If your heir dies, what happens next? This is an issue that comes up in estate law. If not frequent, it is certainly not rare. After you write your will, what happens if your heirs die before they can inherit? The answers here depend entirely on your state’s laws. Below we discuss the most common outcomes, although readers should note that estate and property are two of the most state-specific areas of the law. Make sure to consult an attorney or financial advisor before making any decisions about your specific needs.

What Happens If You Die Intestate?

First, while a question regarding beneficiaries necessarily discusses a written will, there is the issue of dying intestate. This means that you die without a will and your estate is distributed based on the laws of your state rather than your stated wishes. In most states this means that your assets will be split evenly among your closest next of kin, typically traveling to a spouse, then to children, then to siblings and so on.

Under most, if not all, state laws, intestate inheritance is based on surviving family members. That is to say, the court essentially combs your family tree looking for the next closest relative currently alive. If you had a closer relative, but they have since died, neither their estate nor their heirs have any rights.

For example, say that your state distributes assets first to a spouse, then to children. If your spouse predeceases you, neither their heirs nor their family has any claim to your estate. Instead, if you have children, the estate would pass to them.

Lapsed Gifts in a Will

When your will leaves assets to a beneficiary who is, themselves, dead it 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 which 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.

First, 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.

Second, 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

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 is 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. If the will leaves its assets to a generally defined group, for example, “my children” or “my siblings,” then if one member of that group dies 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.

The Bottom Line

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 up to three vetted financial advisors who serve your area, and 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.