What Happens If A Beneficiary Dies Before Receiving An Inheritance?

This beneficiary article is from California and deals with California Law. New York is different.

When the beneficiary of a deceased person’s probate estate or living trust dies during the course of administering the estate and before the full distribution of the inheritance has been made, things can get sticky.

Let’s say a mother dies and her estate is in the process of being probated when her son dies. The son’s estate can claim his inheritance, which it will in turn distribute to the beneficiaries of his estate, according to a recent article, “Beneficiary dies prior to receiving inheritance” from the Lake County Record-Bee.

This might require probating the deceased child’s estate. Whether or not probate is required, depends both on the value of the son’s own estate, which is increased by the amount of the unreceived inheritance. Another factor is whether all or some of the son’s estate passes to a surviving spouse or registered domestic partner.

In California, probate is required when the gross value of a deceased person’s estate exceeds $150,000 and passes to someone other than the decedent’s surviving spouse or registered domestic partner. Estate planning in California, as in other states, is important to lessen the impact of probate.

No probate is needed to transfer assets to a decedent’s surviving spouse or registered domestic partner. They are entitled to use a spousal property court petition to transfer title to real property and other assets held in the name of the deceased spouse into their partner’s name, as relevant.

If the estate is under $150,000, probate is not required and the estate can often be settled by affidavits, or, if the deceased owned real property worth more than $50,000, a small estate petition to confirm title to real and personal property. However, there are instances where probate of a small estate is necessary, because of the decedent’s debts or figuring out who is entitled to receive a portion of the estate.

This type of situation illustrates the benefits of holding assets in a living trust. This avoids probate, spousal property petitions and small estate petitions. Any time property is worth more than $50,000, it makes sense for the owner to hold title to the property in a trust.

Who will then, inherit the son’s estate? If he had a last will and testament, it is the governing document. If he had a revocable living trust, then he likely will also have a “pour-over will,” which “pours” everything over in the estate to the revocable living trust.

Either way, it’s likely the son’s heirs will need to be probated. With no will, the son’s heirs inherit according to the laws of intestate succession.

If the estate has been planned properly, even the complex situation described above will be more manageable. If neither the mother nor the son had an estate plan, it could take many years to unravel the estate. An estate planning attorney can create a plan that is designed with the laws of your state in mind and address many unexpected situations.

Reference: Lake County Record-Bee (December 7, 2019) “Beneficiary dies prior to receiving inheritance”