Unfortunately, it is hard to plan for when a beneficiary passes away. However, Pennsylvania law does provide individuals in this situation with options. If you are creating or updating an estate plan, it’s important to understand what can happen in the event a beneficiary passes away before you or before the estate is distributed. Continue reading and reach out to our Pennsylvania estate planning attorneys today to learn more about how our attorneys can help you.
What Is A Beneficiary’s Role In An Estate Plan In Pennsylvania?
A beneficiary is a person, group, or organization that receives assets from a will, trust, or estate plan following the death of the testator. Beneficiaries are designated within estate planning documents to ensure that assets are distributed in accordance with the testator’s wishes rather than Pennsylvania’s automatic inheritance laws.
When a testator of an estate plan chooses a beneficiary, they are essentially selecting that individual to receive their inheritance in the event that they pass away. It is also important to note that beneficiaries play a big role in an estate plan. In fact, most people create an estate plan because they would like to appoint loved ones to receive their assets once they are no longer alive.
A comprehensive estate plan typically has several different types of beneficiaries. These are known as primary beneficiaries and contingent beneficiaries. Furthermore, not all beneficiaries have to be individuals, or classes of individuals, for instance, children or grandchildren. Instead, a person can choose their beneficiary to be an organization or several organizations.
Types of Beneficiaries in an Estate Plan
- Primary Beneficiaries
- The individual or organization that is first in line to receive property or assets from a will or trust
- This individual will receive the inheritance if they survive the testator
- Contingent Beneficiaries
- Often called the “second-in-line” beneficiary
- They receive the inheritance if the primary beneficiary passes away or otherwise cannot accept the inheritance
- Residuary Beneficiaries
- Receives any remaining assets not specifically gifted in the will
- Often inherits assets when another gift fails
Examples of Who Can Be Named as a Beneficiary in PA
- A spouse or domestic partner
- Adult children or grandchildren
- Extended family
- Close friends
- Caretakers
- Charities
- Trusts created for minor children
What Happens if a Beneficiary Dies Before You in Pennsylvania?
If a beneficiary of a trust or will passes away, the owner of the estate plan will have to go back and revise their estate plan. However, if the testator has already passed, then Pennsylvania law will determine how the property is distributed.
If the will includes alternate beneficiaries, then the alternate gets the inheritance. If the will does not name an alternate, or the alternate has also passed away, you will have something called a “lapsed” or “failed” gift.
What Happens When a Beneficiary Dies?
- The inheritance goes to the contingent beneficiary named in the will
- The inheritance moves to the beneficiary’s descendants, under your state’s “anti-lapse” law
- The inheritance becomes part of the residuary estate
- If these options aren’t applicable, the inheritance will be distributed in accordance with Pennsylvania intestacy laws
Understanding Pennsylvania’s Anti-Lapse Law
As mentioned, Pennsylvania has what’s called an “anti-lapse” statute. This essentially prevents an inheritance from failing in the event a beneficiary passes away before the testator or before the estate can be distributed following the death of the testator.
Under Pennsylvania law, inheritance distribution is governed by the Pennsylvania Descedents, Estates, and Fiduciaries Code. This law determines how property is transferred following someone’s death, including the interpretation of wills, handling of lapsed gifts, and how beneficiaries’ descendants may inherit property under anti-lapse statutes.
This law works by allowing the deceased beneficiary’s descendants to inherit the property rather than allowing it to pass into the residuary estate. This generally applies when the beneficiary is a direct family member of the testator, like:
- A child
- A sibling
- A grandchild
- A direct descendant
Key Facts About Anti-Lapse Laws
- Anti-lapse laws prevent certain inheritances from automatically failing
- They generally apply when the deceased beneficiary is related to the person who created the will
- The gift can pass to the beneficiary’s children or grandchildren
- This law will not apply if the will explicitly states a different distribution plan
- Proper estate planning language can override this statute
What Happens if a Pennsylvania Will Does Not Name a Contingent Beneficiary?
In the event a will does not include a contingent beneficiary, an inheritance may become what is commonly referred to as a “lapsed gift.” Depending on Pennsylvania law and how the will is structured, the property can be passed to:
- A residuary beneficiary as named in the will
- The deceased beneficiary’s descendants under Pennsylvania’s anti-lapse law
- The decedent’s heirs, in accordance with Pennsylvania intestacy laws
Ways to Prevent Beneficiary Issues
- Name multiple contingent beneficiaries
- Update wills following significant life events
- Establish a revocable living trust
- Include a detailed residuary clause
- Review your estate plan with an experienced attorney
Contact Our Experienced Pennsylvania Estate Planning Firm
Navigating the estate planning process can be incredibly overwhelming, which is why it’s in your best interest to work with an experienced attorney with Heritage Elder Law & Estate Planning. Our firm understands that this process can be incredibly complicated, which is why we are committed to helping you explore your options to create a comprehensive estate plan. Contact us today to learn how we can represent you.
