The creation of an estate plan is important because it allows you to decide several things, including who you wish to receive your assets when you pass away. However, sometimes those whom you plan to leave property to may pass away before you. When this occurs, what does that mean for your estate plan?
What Is a Beneficiary?
A beneficiary is a party that is to receive an inheritance from you upon your passing. This may include your heirs or other designated parties. You are able to name individuals, such as your spouse or one of your children, whom you wish to receive specific assets. However, you can also leave assets to classes of individuals, such as (all of) your children, or to charities and other organizations. Sometimes people outlive the individual, class of individuals, or organization that they have named as beneficiary.
A Beneficiary’s Death
Unless you state otherwise in your will or trust, if a beneficiary dies before you, their inheritance will no longer be in effect. However, the rest of your will or trust will remain intact. For instance, if the beneficiary was the only individual named to receive a specific asset, the asset would then go to your heirs. If the beneficiary was part of a class of individuals, they would no longer be included when dividing your assets. If one of your three children passes away and you named children as beneficiaries of your home, the home would go to the other two upon your death with each child receiving one-half of it rather than one-third.
It’s important that your estate plan is comprehensive and addresses what should occur in the event that one of your beneficiaries passes away. By doing so you can help to prevent disputes, which would require probate court and would cost your loved ones a lot of time and money.
Name Alternate Beneficiaries
One way to prepare for the possibility of a beneficiary passing is by naming alternate beneficiaries in your will and your trust. This means that if the primary beneficiary predeceases you, the alternate will receive their inheritance instead. You can choose to state that your inheritance passes “per stirpes,” meaning that the inheritance that was intended for the primary beneficiary will go to that person’s descendants. For instance, if your child predeceases you, the inheritance would be split equally among their children. If no descendants exist, the inheritance would lapse.
You can also choose to name specific alternate beneficiaries. For instance, you can designate one child as the beneficiary of Account A and state in your will and trust that “Should she predecease me, the aforementioned funds should pass to my oldest surviving child.”
In rare cases, the primary and alternate beneficiaries may predecease you. To prepare for this you can include a clause that explains what you wish to be done should such a situation arise. You may choose for the asset(s) in question to go to your heirs (closest living relatives) or to a charity or organization.
Regularly Review Your Estate Plan
One of the best ways that you can avoid any complications concerning a beneficiary predeceasing you, is by regularly reviewing your estate plan and revising your documents when needed. You can remove deceased beneficiaries and add new primary and alternative ones.
Biddle Law Can Help
You deserve to have your assets go to the beneficiaries of your choice. Since wills and trusts can be challenged, it’s important to consult with a knowledgeable and experienced California estate planning attorney who knows the current laws and has experience with the creation of comprehensive estate plans.
At Biddle Law, we are here to answer all of your questions and walk you through the entire process. We care about you and your loved ones and want to help in any way we can. To learn more or to schedule a consultation, contact us today!