A beneficiary is a person, charity, or other organization that receives money or property because someone specifically named them in their will or trust. The items being inherited could be things like money, property, or personal items like jewelry or a family heirloom.
There can be different types of beneficiaries in one estate plan:
- A primary beneficiary is the person or organization that will inherit first from a will or trust.
- A contingent beneficiary (also known as an “alternate”) is the person or organization that would inherit if the primary beneficiary died before the person who created the will or trust.
We recommend that our clients review their estate plans every few years. That way if any beneficiary has passed away, our client can update their estate plan according to their wishes.
What if a primary beneficiary dies before the person who created the trust or will passes away? Then the inheritance that was set to go to that beneficiary is no longer in effect.
Let’s say George created an estate plan that indicated that his estate should go to his two adult children (Sam and Sally) in equal parts. That means each adult child would inherit one half of George’s estate when he passes. Unfortunately, George’s son Sam dies as a young man, leaving George and Sally grieving that loss. When George passes away a few months after Sam, Sally inherits all of George’s estate.
One technique an estate plan can use is to say the inheritances passes “per stirpes.” That means if a primary beneficiary dies before the creator of the will or trust passes away, the beneficiary’s share of the estate automatically gets distributed evenly among that beneficiary’s children.
An example: Let’s continue to use the scenario above and say Sam has two adult children named Carrie and Matt. George’s estate plan indicates that the inheritance is left to “his son Sam, per stirpes, and his daughter Sally in equal parts.” Sam passes away three months before his dad George dies. When George dies, Sam’s one-half portion is divided evenly between Carrie and Matt. Sally still inherits her half.
The will or trust can also name alternate beneficiaries. Let’s say George leaves his estate to Sally and Sam. His will says that “if Sam doesn’t survive me, his share of my estate shall go to my nephew, Colin O’Shea.” Sam dies three months before George. When George dies, Colin and Sally would each inherit one half of George’s estate.
The estate plan can also indicate that if the primary and alternate beneficiaries died before the creator of the estate plan, the inheritance should go to an organization like a charity, research center, or religious group.
It’s best to amend an estate plan when a beneficiary dies before the person who had created the estate plan. But it’s a good idea to use language that considers the possibility of a primary beneficiary predeceasing the creator of the estate plan. As a skilled Massachusetts estate planning attorney, I’ll work with you to develop an estate plan that will distribute the inheritance to the people and organizations that mean the most to you. Contact us today for a free, no-obligation consultation.