What Happens When a Beneficiary Dies Before the Testator?

Once you have signed a will or a trust, you may think the process is complete. However, these documents can easily fall out of date as events unfold and circumstances change. A beneficiary who was alive when a will was drafted may no longer be living years later. If the beneficiary dies before the will’s creator (the testator), the gift may lapse, meaning it can no longer be distributed as originally intended. This may ultimately result in assets passing to someone other than the person the testator had in mind.

Michigan law contains an important safeguard known as the anti-lapse statute. Its purpose is to prevent gifts from failing simply because the intended beneficiary predeceased the testator. If the deceased beneficiary was a family member and left descendants of their own, those descendants may inherit what would have gone to the beneficiary. For example, if a parent leaves a portion of an estate to a child who later dies before the parent, the child’s children may be entitled to receive that share. 

Another provision of the anti-lapse statute concerns class gifts. Rather than naming specific individuals, a testator might leave property to a class, such as “my children” or “my grandchildren.” Class gifts can lead to varying results if a class member predeceases the testator. Depending on the circumstances, surviving class members may divide the gift among themselves or the descendants of the deceased member might have the right to that member’s share. These outcomes can become quite complicated.

The anti-lapse statute states that its provisions do not apply if the testator’s will expressly designates an alternative beneficiary to take the share of one who has died. For example, a will might state: “I leave my residence to my daughter, but if she does not survive me, then to my grandson.” Another option is a residuary clause, stating that any remaining property of the estate is to go to designated recipients. Similar backup designations can be used in trusts, life insurance policies and retirement accounts. 

By identifying alternate beneficiaries, the testator can maintain control over how assets are distributed. Importantly, they can avoid the worst-case scenario, in which a beneficiary has died with no descendants and the lapsed gift ends up being distributed according to state intestacy law.

The best way to prevent failed gifts and unintended distributions is through careful drafting and periodic review of estate-planning documents. Estate plans should also be revisited whenever there is a significant change in family circumstances. An experienced Michigan estate planning attorney can assist you in placing provisions in your will that will be effective in preventing lapsed gifts.

Otlewski & Maloney, P.C. in Rochester Hills assists Michigan residents in all aspects of estate planning and probate. Call us at 248-759-5641 or contact us online to set up an appointment.