When you have a primary beneficiary to your estate, you might assume that this individual will live longer than you. However, this is not always the case and you will need to work with your estate planning attorney to determine what will happen if your primary beneficiary passes away.
What is a Beneficiary?
A beneficiary is an individual who will receive an inheritance when you pass away. Because the whole point of planning an estate is to pass your assets on to your beneficiaries, these individuals are an important part of your estate.
What Happens When a Beneficiary Passes Away?
Your beneficiaries can be primary beneficiaries and contingent beneficiaries. The primary beneficiary is the first individual to receive an inheritance first. If this individual passes away while you are still alive, you will want to amend your estate plan as soon as possible. You may need to name a new beneficiary at this point.
However, you will also want to create an estate plan that will have a contingency plan in the event that the primary beneficiary passes away. You could say that the inheritance lapses if the individual passes away. For example, if you have four children and one child passes away, the inheritance would be divided among the other three children.
What About the Grandchildren?
Another approach is to have the inheritance be distributed "per stripes." What this means is that the children of the beneficiary will receive the inheritance instead of the primary beneficiary. Then, the inheritance would be split evenly by all the children of the inheritor. If some of your children have their own children and others do not, the inheritance would be treated as if it had lapsed.
What if There are No Beneficiaries?
There are some cases where an entire family passes away and there are no beneficiaries left. This usually happens after a disaster or an accident in which the entire family is involved, such as a house fire. You will need to include a plan for what will happen in this case.
You will have several options available for when all beneficiaries have passed away. One option is to pass all of your assets onto your closest living relatives. However, this might lead to a dispute over your relatives regarding the distribution of the assets.
Can I Donate My Assets?
Finally, your last backup plan could be to have your assets given to an organization such as a charity. If you are wondering what the pros and cons are of each option, consult with an estate planning attorney.