Despite the numerous rules and procedures designed to help the probate process run smoothly, something unexpected inevitably comes up that causes a glitch in the process. For example, what happens to the inheritance of a beneficiary who dies during the probate of an estate? The Phoenix probate attorneys at Morris Hall PLLC explain who ultimately ends up with the inheritance if the intended beneficiary passes away during probate.
An Overview of Probate
If you have never been involved in the probate of an estate before, it helps to first gain a basic understanding of the process and to learn why it is required. When an individual passes away, he or she leaves behind an estate that is made up of all assets owned by the decedent at the time of death. An estate may be very modest, consisting of nothing more than personal belongings and a small bank account – or an estate may be made up of complex and valuable investments, real property, and multiple bank accounts. Whether the estate is small or large, the law requires the assets that make up that estate to be accounted for and ultimately passed down to the intended beneficiaries or heirs of the estate. Before assets are transferred out of the estate, however, debts of the estate – including gift and estate taxes — must be paid. All of this occurs during the probate process.
Note that, although they are similar, a beneficiary and an heir are not the same. A beneficiary refers to someone named in the decedent’s Will or a trust while an heir is someone who stands to inherit from the decedent under the state’s intestate succession laws if the decedent failed to leave behind a Will or trust.
How Does the Death of a Beneficiary Impact an Estate?
One of the first things that occur during the probate of an estate is identifying the beneficiaries of the estate if the decedent left behind a Last Will and Testament. It isn’t until the very end of the process, however, that the beneficiaries will receive their inheritance – and a lot can happen in the meantime. Probating even a relatively modest estate without complex assets can often take several months while an estate with high value and/or complex assets can take years to probate. Given the length of time it can take to get through the probate process it is possible for a beneficiary to die before the end of the process. If that does happen, what happens to the inheritance that was earmarked for the deceased beneficiary?
The general rule is that if a beneficiary dies during probate but prior to the point at which assets have been transferred into his/her name, those assets become part of the deceased beneficiary’s estate. By way of illustration, imagine that you gifted $50,000 to your sister Sarah in your Will, but Sarah died before it was time to transfer that $50,000 into Sarah’s name. That $50,000 would become part of Sarah’s estate, meaning that the $50,000 would ultimately be inherited by whoever Sarah named as the beneficiaries of her estate in her Will or trust. In the alternative, the property would go to her legal heirs if she died intestate (without a Will.) The bottom line is that the general rule is that the assets of a deceased beneficiary become part of the estate of the deceased beneficiary.
Every Rule Has Exceptions
Every general rule has at least one exception to that rule. In this case, there are two important exceptions to the basic rule regarding the death of a beneficiary prior to the completion of probate. Both exceptions only potentially apply if the beneficiary died shortly after, or at the same time as, the decedent. In that case, the terms of the decedent’s Will might dictate that the assets pass to a different beneficiary. It is somewhat common to include language is a Will that requires a beneficiary to live for a designated time after the death of the Testator.
For example, imagine once again that you gifted $50,000 to your sister Sarah in your Will. Unfortunately, however, Sarah was in the vehicle with you in the vehicle when you were involved in the collision that caused your death. Sarah died shortly after you did. The terms of your Will might dictate that a beneficiary must survive you by a specific amount of time (such as 72 hours) in order to inherit from your estate. If Sarah did not live long enough, the property will not become part of her estate. Instead, it will pass to whoever is next in line according to the terms of your Will.
The second exception involves the same fact pattern except your Will is silent on the issue of how long a beneficiary must survive you in order to inherit. In that case, state law may fill in the blanks. Sometimes state law requires a beneficiary to survive for a specific period of time in order to inherit from a decedent. In that case, the inheritance will also revert back to your estate and pass to whoever is next in line according to the terms of your Will.
Contact Our Phoenix Probate Attorneys
For more information on what happens if a beneficiary dies during probate, please join us for an upcoming FREE seminar. If you have questions about the probate process, or you need assistance probating an estate, contact the experienced Phoenix probate attorneys at Morris Hall PLLC by calling 888-222-1328 to schedule your free consultation today.