If a POD beneficiary you've named dies, be sure to name a new beneficiary.
Most of us choose people younger than ourselves to inherit our money and property, fully expecting them to outlive us. But sometimes this natural course of events is disrupted. If someone you have named as a POD beneficiary for a bank account or CD dies before you do, you should change the necessary paperwork at the bank to put a new beneficiary in place.
What Happens If a Beneficiary Dies
If you named more than one payee, and one or more of them dies before you do, the funds in the account will go to the survivor(s) at your death. (See "Choosing POD Beneficiaries for a Bank Account.")
If, however, none of the POD payees you named is alive at your death, the bank will release the funds in the account to your executor, who will be responsible for seeing that the money is distributed under the terms of your will or (if you have no will) state law. The money will probably have to go through probate, unless your estate is small enough to qualify for special, simpler procedures in your state.
If you want to name alternate beneficiaries, don't rely on a POD account. Banks generally don't allow you to name an alternate POD payee—that is, someone who would inherit the money if none of your primary beneficiaries outlived you.
Your will, if you make one (and you should, for reasons like this) functions as a backup in this case, as explained below. But that doesn't avoid probate. If you want to both name a back-up beneficiary and be sure of avoiding probate, you'll probably want to use a living trust.
If the money goes to your executor, it will be distributed under the terms of your will, even though you most likely didn't even mention this account in your will. That's because most wills contain what is called a "residuary clause," which names a beneficiary to inherit everything that's not specifically mentioned in the will. The person you named to inherit this residuary property would receive this money.
EXAMPLE: Mark names his brother as the POD beneficiary of his savings account. But his brother dies, and Mark doesn't get around to changing the paperwork at the bank to name a new payee. Mark does, however, have a will that contains a residuary clause, naming his daughter Madeline as residuary beneficiary. When Mark dies, and the will is probated, the money in the account goes to her, along with everything else that Mark didn't specifically leave to another beneficiary.
How to Name a Different Beneficiary
To name a new POD beneficiary for a bank account, you must submit whatever forms your financial institution requires. The POD arrangement is an agreement between you and the bank--it's not something you can create in your will, for example. So get the right paperwork, fill it out and sign it, and get it back to the bank! If you don't, the person you want to inherit the money won't have any claim to it after your death. (For more on this, see "If You Change Your Mind About a POD Beneficiary.")
FAQs
Generally speaking, if a beneficiary dies before you, their gift lapses – it becomes null and void as if it never existed. Their share is then distributed as part of your estate to the remaining beneficiaries.
What happens if your beneficiary dies before you do? ›
If your sole primary beneficiary passes away, the death benefit would go to any contingent beneficiaries you named when you applied for your policy. In the event you didn't designate any contingent beneficiaries, the death payout would likely go directly into your estate.
What happens if a beneficiary has died? ›
In some cases, there will be a clause in the Will stating that if a certain beneficiary dies before the deceased, their inheritance will pass onto someone else. If there is no such clause, the inheritance will be divided up and redistributed to the residuary beneficiaries at the end of the probate process.
What happens if beneficiary dies before testator? ›
Under California Probate Code §21110, if a named beneficiary dies before the Will-maker, the heirs (i.e. kindred/related by consanguinity) of the deceased beneficiary may, based on several requirements, inherit the gift in his/or her place.
What happens if one of the primary beneficiaries dies in a trust? ›
If a beneficiary passes away, then the person who established the trust or had the will drafted should go back and have it amended. Sometimes as estate planners we get asked, “If a beneficiary dies, does our estate plan no longer have effect?”
Who inherits if one beneficiary dies? ›
Unless the will named an alternate beneficiary, anti-lapse laws generally give property to the children of the deceased beneficiary. For example, if a woman left money to her daughter, and the daughter died first, the money would go to the daughter's children.
Can a beneficiary give up their inheritance? ›
Disclaiming an inheritance isn't something you might automatically choose to do, but it's good to know the option exists if receiving an inheritance isn't right for you. The most important thing is to understand what you're giving up and how to disclaim assets properly so there are no questions or conflicts later.
What is a survivorship clause? ›
Under a survivorship clause, the beneficiary only inherits if he survives for the stated period after the testator's death. Failure to survive the requisite period causes the gift to pass as provided in the will. A common survivorship period, often adopted, is 28 days but may be as long as desired.
Who gets money if no beneficiary? ›
Without a named beneficiary, your life insurance proceeds become part of your estate. The life insurance proceeds get distributed accordingly, along with the rest of your assets. Your estate may need to go through probate, which often charges substantial fees and could take a long time before reaching your heirs.
How long does it take to pay beneficiaries after death? ›
There's no standard deadline for paying beneficiaries of a will, but estates complete the probate process in six to nine months on average. Probate laws vary by state, and many states don't set a deadline at all for executors to pay the beneficiaries of a will.
In most situations, beneficiaries can't override a legally-appointed executor just because they don't like the decisions they are making. However, if a beneficiary believes that the executor is not following the terms of the will, they have the legal right to ask the court to appoint a new executor.
Who inherits if a beneficiary dies before the testator in Florida? ›
Florida's Anti-Lapse Statute applies to assets earmarked for specific relatives in a will. If the beneficiary dies before the testator, their share of the estate will pass to their surviving descendants, if any.
What happens if a beneficiary dies before the estate is settled California? ›
When a beneficiary under the will of the decedent died before the decedent or fails to survive the decedent for a period required by the decedent's will, notice must be sent to the persons named in the decedent's will as substitute beneficiaries of the gift to the predeceased beneficiary.
Can a beneficiary override a trust? ›
The designation of a beneficiary on a bank account generally takes precedence over the instructions outlined in a Will or trust.
Does the beneficiary get everything? ›
You could write a will naming them as your sole beneficiary. Once you pass away, they would inherit all of the assets from your estate, according to the will's instructions. They could also inherit assets that require you to name a beneficiary, such as retirement accounts or a life insurance policy.
Who has the right to change a revocable beneficiary? ›
With a revocable beneficiary, the person or entity you choose has no legal interest in the death benefit during the insured person's lifetime. The policy owner is in total control. A revocable beneficiary may be changed at any time by the policy owners without the consent of the currently named beneficiaries.
Does a life insurance beneficiary override a will? ›
In general, life insurance beneficiaries generally overrule a will. For instance, if your will states that you want your partner to receive your death benefit, but the policy itself lists your sibling as the only beneficiary, your sibling will be eligible to receive the death benefit and your partner will not.
What happens if the insured and primary beneficiary are killed? ›
The Uniform Simultaneous Death Act is a law which provides that if the insured and the primary beneficiary both die under conditions in which it is impossible to determine which one died first, the insured will be presumed to have survived the primary beneficiary unless there is a policy provision to the contrary.
What happens to life insurance with no beneficiary? ›
What happens to life insurance with no beneficiaries? Most life insurance companies require you to name at least one beneficiary. If beneficiaries are not named, the life insurance proceeds will go to your estate. If you don't have a will, your estate, including the death benefit, may need to go through probate court.
