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Texas estate planning attorney
Shawn McCammon
Shawn McCammon
Attorney at Law

Shawn McCammon is the founder and managing shareholder of McCammon Law. Shawn has been practicing for over 20 years, starting off in litigation before working in-house as a corporate attorney, and finally opening his own firm in 2009.

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What Happens If a Beneficiary Dies Before Receiving an Inheritance?

February 5, 2025
When a beneficiary dies before receiving their inheritance, estate distribution can become more complicated. Understanding succession rules, will provisions, and probate laws ensures that assets are transferred as intended.

Estate planning ensures your assets are distributed according to your wishes, but what happens if a beneficiary dies before receiving their inheritance? The outcome depends on several factors, including your estate plan, state laws, and whether contingent beneficiaries are named. A Texas estate planning attorney can help ensure your plan accounts for these situations, preventing legal complications and unintended asset distributions.

How Inheritances Are Handled When a Beneficiary Dies

When a named beneficiary passes away before receiving their inheritance, the next steps depend on the estate plan’s terms and state probate laws. Below are the key factors that determine what happens to the assets.

1. Is a Contingent Beneficiary Named?

A well-prepared estate plan includes contingent (backup) beneficiaries. If the primary beneficiary has passed away, the inheritance automatically transfers to the contingent beneficiary.

For example, a will might state:
"I leave my home to my daughter, but if she predeceases me, it shall pass to my grandson."

In this case, the grandson inherits the home instead of the asset becoming part of the general estate.

2. Do Texas Anti-Lapse Laws Apply?

Texas has an anti-lapse statute, which prevents an inheritance from returning to the estate if the deceased beneficiary was a close family member. This law ensures that if a beneficiary (such as a child or sibling) passes away before the will-maker, their share typically goes to their descendants.

For example, if a father names his son as a beneficiary and the son dies before him, Texas anti-lapse law may pass the inheritance to the son’s children instead. However, this statute does not apply to unrelated individuals or non-direct descendants.

3. What Happens in a Trust When a Beneficiary Dies?

If a trust is part of an estate plan, the trust’s instructions dictate what happens when a beneficiary dies. Many trusts name successor beneficiaries, allowing a smooth transition of assets.

For example:

  • If a trust divides assets among three children and one child dies, their share may go to their own children.
  • If no successor is named, the trust terms or state laws will determine the outcome.

Working with a Texas estate planning attorney can help ensure your trust accounts for all possibilities, avoiding disputes.

4. If No Contingent Beneficiary Exists, Who Inherits?

If the estate plan does not name a backup beneficiary and the primary beneficiary has died, the inheritance may:

  • Pass to the estate’s residual beneficiaries—those who inherit remaining assets after specific bequests.
  • Be distributed according to Texas intestacy laws, which prioritize spouses, children, and other close relatives.
  • Escheat to the state if no legal heirs can be identified.

To avoid these uncertainties, regularly updating your estate plan to include contingent beneficiaries is essential.

Special Considerations for Different Asset Types

Life Insurance Policies

If a life insurance beneficiary dies before the policyholder, the insurance payout may:

  • Go to a contingent beneficiary, if one is named.
  • Be divided among remaining beneficiaries, if there are multiple.
  • Be paid into the estate, potentially subjecting it to probate.

Naming multiple beneficiaries and reviewing policies regularly can help prevent complications.

Jointly Owned Property

Assets like real estate and bank accounts held in joint tenancy with right of survivorship automatically pass to the surviving co-owner, regardless of what a will states. Read more in our article, How Do Joint Accounts and Beneficiary Designations Work in Estate Planning?

Retirement Accounts and Payable-on-Death Accounts

If a retirement account (IRA, 401(k)) or a payable-on-death (POD) account has no surviving beneficiary, the assets may be transferred to the estate, potentially leading to probate delays.

Executor Responsibilities When a Beneficiary Dies

If a named beneficiary has passed away, the estate executor must:

  1. Review the will or trust to check for contingent beneficiaries.
  2. Determine if Texas anti-lapse laws apply to direct descendants.
  3. Distribute assets according to the estate plan or intestacy laws if no backup beneficiaries exist.
  4. Consult a probate attorney if there are disputes or legal uncertainties.

How to Prevent Issues in Your Estate Plan

To avoid inheritance complications, consider these estate planning best practices:

Name contingent beneficiaries for all major assets, including wills, trusts, and insurance policies.
Review and update your estate plan regularly to reflect changes in family circumstances.
Use a trust to provide structured asset distribution and minimize probate risks.
Understand Texas laws on inheritance and probate to avoid unintended consequences.

Plan Ahead With a Texas Estate Planning Attorney

Estate planning requires careful consideration of life’s uncertainties, including the possibility of a beneficiary passing away. A Texas estate planning attorney can help you create a plan that ensures your assets are distributed as intended, protecting your family’s future and ensuring that assets pass efficiently to the intended heirs without unnecessary legal challenges. At McCammon Law, P.C., we help individuals and families in Texas create estate plans that stand the test of time. Request a consultation today to review or update your plan.

Key Takeaways

  • Contingent Beneficiaries Matter: Naming backup beneficiaries in a will or trust ensures assets are passed on without confusion.
  • State Laws Impact Distribution: Anti-lapse statutes may transfer an inheritance to a deceased beneficiary’s descendants.
  • Trusts Can Simplify Transfers: Many trusts include successor beneficiaries to prevent probate complications.
  • Executor Responsibilities: If a beneficiary dies, the executor must review legal documents and distribute assets accordingly.
  • Regular Estate Plan Updates: Reviewing and updating estate plans periodically prevents legal disputes and ensures clear asset distribution.

ReferencesReference: SmartAsset (June 21, 2023) "What Happens to an Inheritance If a Beneficiary Has Died?" and yahoo! finance (September 5, 2023) “What happens if your life insurance beneficiary dies before you?”

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