Are My Assets Are At Risk if My Beneficiaries Die?

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What Happens to My Assets if None of the Beneficiaries Named in My Living Trust Survive Me?

Your living trust should include an “ultimate distribution” provision that addresses the unlikely scenario that all of your beneficiaries—typically your spouse, children or grandchildren—do not survive you. What is sometimes referred to as a the “family disaster” provision might specify that your assets would pass to designated “contingent” beneficiaries such as your siblings, nieces or nephews, charities, friends, or some combination of these people or entities. Or, the ultimate distribution provision might simply provide that your assets would be distributed to your “intestate” heirs—that is, those persons who would receive your assets under the laws of your state had you died without a plan.

What Happens to a Trust After a Beneficiary Dies?

Most trusts follow the same basic rules, although some can get a lot more complicated from there. They’re legal entities that hold money and property for the benefit of those who will eventually inherit it. In the simplest terms, a trust is either revocable – meaning the settlor or person who created it can change it at any time – or it’s irrevocable and its terms are carved in stone. If the beneficiary of a revocable trust dies before the settlor does, the settlor can simply rewrite his trust instrument to address the change. If the beneficiary dies after the settlor dies and the trust still holds property on behalf of the beneficiary, the property often passes to the beneficiary’s estate.

Trust Shares When a Beneficiary Passes Away

What are some of the possible outcomes if a beneficiary dies before receiving some or all of his share under the terms of a trust?

• The beneficiary’s share may pass to his surviving spouse.
• The beneficiary’s share may pass to his surviving children.
• The beneficiary’s share may pass to his surviving siblings.
• The beneficiary’s share may pass to a charitable organization named by the decedent.
• The beneficiary’s share may revert to a common pot for the benefit of multiple beneficiaries.
• The beneficiary’s share may be divided and distributed among a variety of individuals.
• The beneficiary’s share may pass to the individuals who would have received the decedent’s assets under the laws of the state if the decedent died without a will.