What Happens If A Beneficiary Dies?

Usually, one of the foremost goals of the estate planning process is to develop a set of tools and instructions that will facilitate the efficient transfer of an individual’s property to the specific beneficiaries he or she would like to receive those assets, once the individual who previously owned them has passed away. The smooth functioning of all these plans therefore tends to depend heavily on the beneficiaries outliving the estate planner. Life is uncertain, however, and to prepare for all eventualities it is important to give due consideration to what happens if a beneficiary dies before the person who has named them in a Last Will and Testament (Will) or other estate planning document. An estate planning lawyer with Loughlin Law, P.A. may be able to evaluate your circumstances and help you set up a plan to account for what happens if a beneficiary dies, based on your priorities. If you are in the unfortunate position of needing to determine how to distribute a loved one’s property during probate after one or more of their beneficiaries have died, a member of our probate team may be able to help you navigate that process. Call 561-559-6214 today to let us know your needs and set up a consultation.

What Happens if a Beneficiary Has Died?

What happens if a beneficiary has died can actually depend on a few factors. Among these, the most important items to keep in mind are usually:

• The type of property
• The estate planning tool used to designate the beneficiary
• The dates of death for both the beneficiary and the estate planner

The respective dates of death are important primarily because most states have laws comparable to Florida’s Simultaneous Death Law, specifically delineating how to handle property when either of the following apply:

• A beneficiary dies so soon before a testator (person who creates a Will) that the testator has limited opportunity to update his or her Will and other estate planning documents
• A beneficiary dies so soon after someone who has left them property that they pass away before the executor of the decedent’s estate can transfer the bequest into the beneficiary’s possession.

State probate laws will generally govern all of these considerations, so working with an estate planning attorney familiar with the probate laws in your jurisdiction can often be very helpful.

Who Gets Money if the Beneficiary Is Deceased on a Life Insurance Policy?

Different rules tend to apply to assets that are designated for beneficiaries via the beneficiary designations on life insurance policies or certain types of financial accounts vs. those that are left to specific beneficiaries via the decedent’s Will. If you are preparing an estate plan, exploring all of the options for structuring your beneficiary designations can help you to make informed decisions and develop a system designed to streamline the process for both beneficiaries and the personal representative of your estate, who will be responsible for carrying items designated in your Will through the probate process.

Contingent Beneficiary

Most life insurance policies are set up to allow for the policyholder to designate a contingent beneficiary in addition to the primary beneficiary. The primary beneficiary is the person who is expected to receive the full value of the life insurance payout upon your death. The contingent beneficiary will usually be contacted to receive the death benefit only if the primary beneficiary has predeceased the life insurance policyholder or if, after a thorough search, the life insurance company has been unable to locate the individual designated in the policy.

Multiple Beneficiaries

Many life insurance policies also allow the purchasers to designate more than one primary beneficiary. Usually this will mean that the policyholder also needs to specify how they would like the payout to be divided among these beneficiaries. If there are multiple beneficiaries, the terms can often be set up to redistribute how the benefit is paid out. The simplest structure in this instance is usually to divide the deceased beneficiary’s share evenly among the surviving beneficiaries, who will likely need to present a death certificate not only for the policyholder, but for their deceased beneficiary, in order to receive their shares of the life insurance payout.

TOD and POD Accounts: What Happens if a Beneficiary Is Predeceased?

Like life insurance policies, many financial accounts allow for the account owner to designate a beneficiary to whom the assets in each account may be transferred upon proof of the account holder’s death. These beneficiary designations, divided into “payable-on-death” or “pay-on-death” accounts (POD) and “transfer-on-death” (TOD) categories, are popular estate planning tools because assets transferred in this manner can typically reach their intended beneficiaries without the lengthy and sometimes expensive probate process.

POD Accounts With Multiple or Contingent Beneficiaries

What happens if a beneficiary dies before the account holder will depend partly on how the designation is set up. Some financial assets considered “pay-on-death” accounts in Florida –typically the savings and checking accounts found in banks and credit unions – allow for the designation of multiple beneficiaries. The financial institution may set a maximum number of beneficiaries among whom the assets in an account may be divided.

Florida law generally limits the options for dividing assets in POD accounts among beneficiaries to equal shares. Under Fla. Rev. Stat. § 655.82 (2024), beneficiaries do not share in a “right of survivorship,” meaning that if a beneficiary dies after ownership of the account has been transferred to two or more beneficiaries in equal shares, the deceased beneficiary’s share does not automatically redistribute to the surviving beneficiaries. However, if one beneficiary dies before the financial institution has paid out the sums or otherwise completed the transfer of ownership, then the surviving beneficiaries may claim right of survivorship by presenting certificates of death for both the account holder and the predeceased beneficiary.

POD Accounts With Sole Beneficiary Designations

If the sole beneficiary named on a transfer-on-death account dies before the account holder makes any alternate arrangements, then the assets in the relevant account will revert to the account holder’s estate (not the estate of the deceased beneficiary). The personal representative will then be responsible for carrying those assets through the probate process with the rest of the decedent’s estate. In most cases this will mean that, after the appropriate discharge of all debts encumbering the estate, these assets will be distributed to beneficiaries in accordance with the terms of the individual’s Will. If there is no Will, on the other hand, the assets will be distributed to heirs according to the provisions of Fla. Rev. Stat. § 732.101-111 (2024), which govern the rules of intestate succession throughout the state.

What Happens if a Beneficiary Dies Before They Can Receive a Gift Left in Trust?

Trusts are among the more popular estate planning tools, particularly among individuals who desire a high degree of customization in their estate planning. Some of the flexibility a trust offers depends on whether the trust itself is established as a revocable vs. irrevocable trust. The difference between revocable vs. irrevocable trusts can be especially relevant in determining the options available if a beneficiary dies before the grantor of the trust, but the terms written into the trust instrument itself may also play an important role.

Revocable Trust

What happens if a beneficiary dies before the grantor of a revocable trust is entirely in the discretion of the grantor. Because a grantor retains the right to alter the terms of a revocable trust at any time, or to dissolve the trust completely, he or she can name a new beneficiary to replace the one who has died. If there are still surviving beneficiaries, grantor can remove the name of the predeceased beneficiary and allow the remaining assets to be distributed among the surviving beneficiaries when the time comes, according to whatever instructions for distribution are provided to the trustee. The grantor can also decide to remove the assets originally intended for the predeceased beneficiary and, if that removal does not empty the trust, the grantor can dispose of those assets however he or she sees fit.

Irrevocable Trust

If the grantor does not make any of these changes, then the death of a beneficiary will be handled according to the provisions of Fla. Rev. Stat. § 736.1106, unless the gift made in the trust is an outright devise and the beneficiary is either:

• A grandparent of the grantor
• A descendant of a grandparent of the grantor

In any of the above scenarios, then the Florida Probate Code’s anti-lapse provisions for deceased devisees under § 732.603 will instead direct the descent of property intended for that beneficiary. An attorney with Loughlin Law, P.A. may be able to help you determine which chapter of the Florida Trusts & Estates Code applies to your situation.

Per Stirpes – Most Irrevocable Trusts and Unaltered Inter Vivos Trusts

The provisions set out in § 736.1106 generally establish that the share of a beneficiary who dies before receiving his or her share of benefits from the trust must be instead passed “per stirpes” to his or her own descendants, subject to certain exceptions. The “per stirpes” specification, according to Cornell Law School, means that the deceased beneficiary’s share of the trust assets will be divided among his or her direct heirs such that each heir receives the same portion of the deceased beneficiary’s share of the trust that the heir inherits from the deceased beneficiary’s total estate.

Contrary Intent – Limitations on Anti-Lapse Provisions for Deceased Devisees

Among the circumstances that can trigger an exception to these is the identification of a “contrary intent” in the trust instrument. This same type of exception applies to other estate planning documents (primarily Wills) executed under § 732.603, and these indications of contrary intent constitute the primary means by which the grantors of irrevocable trusts can exercise control over what happens if a beneficiary dies. Fla. Rev. Stat. § 736.1106 (2024) does not provide examples of terms signaling contrary intent, but the Probate Code, under Fla. § 732.603, establishes that phrases such as “if she survives me” and “then surviving children” are sufficient to indicate intent contrary to the per stirpes provisions that would otherwise apply to devises governed by that chapter.

Speak With a Florida Estate Planning Lawyer About What Happens if a Beneficiary Dies

Most people undertake estate planning to exercise some control over how their property will be handled once they have passed away, often with the intention of preventing the loved ones they leave behind from having to make a series of difficult and potentially painful decisions as they are learning to live with their grief. This motivation means that wondering what happens if a beneficiary dies before all portions of the estate plan can be carried out can be extremely stressful. What happens if a beneficiary dies will depend partly on the nature of the property to be transferred, but there are a number of other factors that may also come into play. Speaking with a Florida estate planning lawyer may help you to design an estate plan that accounts for a wide range of possible futures, setting your family up for the easiest possible path through the Florida process. Schedule a consultation with a member of the team at Loughlin Law, P.A. by calling our office today. Reach us at 561-559-6214 to book your appointment.