Beneficiaries: What Happens When One Dies
Last week, we discussed some of the circumstances surrounding the death of a beneficiary. Let’s look at some other situations and solutions for this circumstance.
It isn’t very common, but it does happen where a named beneficiary in a will dies before the will creator. When this happens, you will want to do a few things, but you can also prepare for such a situation by talking to your Michigan estate planning attorney.
One step you could take would be to name alternate beneficiaries in your will. These would be beneficiaries that could accept the inheritance, should the primary beneficiary be unable to do so. An example of how to do this would be naming your child as the primary beneficiary, and then stipulating that if your child is unable to accept the inheritance, then your child’s spouse or children can accept in their place.
What if There Are No Alternate Beneficiaries?
So what happens if the will or trust does not name any alternate beneficiaries? Is the estate plan still in effect?
The good news on this is that the estate plan will still be in effect. The default for a situation where there are no alternate beneficiaries is that the inheritance lapses. This does raise the question concerning what happens if all the primary and alternate beneficiaries pass away at the same time. Although this is an exceedingly rare circumstance, it does occasionally happen. The most common of this very rare situation would be a plane crash where an entire family was on the plane.
So what happens in the situation where the entire family passes away in a single event? A comprehensive estate plan will also take this possibility into effect. Often this portion of the estate plan is called the “Common Disaster Distribution Plan.” In this provision of the estate plan the creator of the plan can choose what to happen if all the primary and alternative beneficiaries are deceased.
The two most common options for this portion of the estate plan are to name an organization such as a charity, research center, or religious group to receive the inheritance. The other common option is to say the inheritance should go to the creator’s “heirs at law.” This is a fancy way of saying the inheritance should go to the creator’s closest living relatives.
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