In some cases, we plan ahead and unfortunately, the people that we have named die before us. If this happens, it is important to review your planning to determine whether or not you need to make any changes or whether or not your plan is sufficient as-is.
When an individual tells me that their beneficiary has passed, that typically tells me that they have named that individual as a beneficiary on a non-probate asset, such as a life insurance policy, an annuity, a retirement account, a payable on death account, a transfer on death account, or in trust for account. If this is the case, the first thing to do is to look to see if you provided for a contingent or successor beneficiary.
If you did provide for a backup beneficiary, then the person that you have named as the contingent will be the person who receives your money if you were to die. If you did not provide for a contingent or backup beneficiary, then the money would go through your estate.
Your estate means that if you have a Last Will and Testament the terms of that document would govern. Therefore, if the beneficiary that you have named is no longer alive and there is no contingent beneficiary, we will look to the Will to see who the beneficiary is under your Last Will and Testament. If it was the same person that was named in the non-probate asset, then we would look to see if the Will provides for a backup or any contingent beneficiaries.
If the Will does not provide for anyone else to receive the asset and did not provide for a word such as "per stirpes" then we may have to look to the laws of intestate succession in the Commonwealth of Pennsylvania. If it does say per stirpes, then that individual’s children would inherit the monies that that individual was entitled to.
If there is no designation such as per stirpes and the beneficiary is not alive, then we will look to the rules of intestate succession in the Commonwealth of Pennsylvania. The state will provide under this statute an order of who would inherit first, second, third, etc. The Commonwealth of Pennsylvania would not be entitled to any of the money unless there are absolutely no beneficiaries or family members that are alive, which is very infrequent if not virtually impossible.
If you are trying to determine who is going to take under the Pennsylvania intestate succession statute, I highly recommend that you seek professional advice for this hierarchy. Seek out the advice of an attorney who specializes in estate planning and has extensive knowledge in estate administration, but also has done cases where there is no Will and the intestate succession statute has governed.
While it sounds pretty simple, this is not a common occurrence. So it would be important to have somebody who has the experience to understand what is going to happen. The bottom line is that if we plan properly and provide for contingent beneficiaries and make a back-up plan in case they die, the fact that your beneficiary died before you should not become a huge issue.
I hope that this article also helps you understand the interplay and inner workings between probate and non-probate assets and how, if there is no contingent beneficiary named and the beneficiary of the non-probate asset is no longer around, it would then default to the estate of the individual. The estate would be governed either by the terms under the Last Will and Testament or under the Pennsylvania intestate succession statute.
If you would like to learn anymore about this topic, please feel free to give us a call at 717-845-5390 or attend one of our upcoming workshops to learn more.