These situations can complicate any estate plan rapidly. Trusts, wills, life insurance policies, and more could be affected. This process can be frightening, but we can help you through it.
What Happens if a Beneficiary Dies Before Receiving Gifts?
As the person preparing your estate, you probably assume that your beneficiaries will outlive you. This, sadly, is not always the case. Sometimes early estate plans may go without updates for decades… This can be problematic in the event of a tragedy. While you certainly can prepare for some of these situations, what happens if it’s too late to adjust?
The circumstances determine what happens next.
If the person forming the estate – The testator – Declares secondary beneficiaries, then that is where the asset will go. Otherwise, if there are no living beneficiaries, the asset returns to the testator’s residuary estate. The residuary estate is “leftover” after all gifts are distributed. This is called a “lapse.” If this happens, it will likely go to another beneficiary. If there are no surviving beneficiaries, intestate succession will begin with the estate.
Understanding Florida’s Anti-Lapse Statute
Many decedents would prefer their gifts go to somebody intentionally, rather than having it decided by some process. For example, you may want a spouse or child of a deceased beneficiary to receive the gift. Florida has established an anti-lapse statute to avoid gifts falling into the residuary estate. This helps avoid lapsing by providing gifts to the beneficiary’s next of kin before lapsing.
This only applies to immediate family, though. If a friend or neighbor receives a gift from the estate, they do not benefit from the anti-lapse statute. Even in-laws aren’t covered.
How to Handle Residual Property
As we mentioned before, you can prepare for these events as you build your estate. One way is to name secondary beneficiaries. The other is to choose where residual property goes. For example, you might donate the monetary value to charity, transfer it to a trust, or leave it to another person. Without these provisions, intestate succession begins, and probate may occur.
It should be noted that this only happens before distribution. If a beneficiary dies after receiving the gift, it becomes part of their estate. This can be complex, as frequently this means the gift goes to their spouse. To prevent these situations, a trustee should be involved in the process. To prevent further issues, you might even need backup trustees to cover any gaps.
The Best Thing to Do
Get in touch with an estate planning attorney ASAP. You can read about some of the other things that can go wrong in the estate planning process on our website… And that’s if all the beneficiaries survive. A beneficiary dying has the potential to complicate the process severely. Luckily, there are laws and protections to help Floridians in these situations.
Call us if you have questions about your estate planning. Then, we’ll represent you through the whole process.