By Cowles Liipfert

What happens if you have a will or revocable trust agreement which leaves some or all of your assets at death to a beneficiary who predeceases you? To whom do assets pass at your death, which are earmarked for the deceased beneficiary?

The answer is more complicated than you might imagine, and it can be dependent on a number of factors.

Beneficiary designations in a well-drafted will or revocable trust agreement will anticipate unexpected events, such as the death of a beneficiary prior to the death of the testator or the Grantor of a revocable trust agreement.  For example, wills commonly provide that a deceased beneficiary’s share will either lapse at death or will be distributed to other beneficiaries.

North Carolina has an anti-lapse statute, NC Gen. Stat. Section 31-42, which determines what happens to certain property under a will if the intended beneficiary predeceases the testator, and no successor beneficiaries are named for a specific devise.

That statute provides that a beneficiary under a will is deemed to have predeceased the testator unless the beneficiary survives for at least 120 hours after the testator’s death (a deadline set by the NC Uniform Simultaneous Death Act), in which case the predeceased beneficiary’s share will pass as follows:

• If the deceased beneficiary is a close relative, i. e, a grandparent of the testator or a descendant of a grandparent, that the descendants of the deceased beneficiary will take the deceased beneficiary’s share, to be divided into further shares as set forth under the North Carolina intestacy laws (the laws which apply when there is no will).
• If the beneficiary is not a close relative as described above, the share of the deceased beneficiary will pass as part of the testator’s residuary estate under the will.  Most wills drafted by attorneys leave any assets which were not left by specific devise, under a catch-all provision, called the “residuary estate.”
• If there is no residuary estate provision in the will, then the deceased beneficiary’s share will pass under the North Carolina intestacy laws, which are often a decedent’s spouse and children first, if any, but they could be more distant kin of the testator if he or she is not married and/or doesn’t have children or grandchildren. 

Please note that the anti-lapse statute by its terms is applicable only to wills.  Presumably that statute would not apply to revocable trust agreements or to other forms of property ownership or to beneficiary designations.

Examples of other forms of ownership which provide for survivorship include ownership as joint tenants with right of survivorship, accounts with transfer-on-death (TOD) or payable-on-death (POD)  provisions, life insurance policies or retirement accounts, payable on death to named beneficiaries, etc.  These forms of ownership should provide for successor beneficiaries.

Please be advised that the default provisions of some accounts may be determined by the  internal documents of the financial firm, which forms control the disposition of those assets and which are not necessarily identical to the North Carolina intestate succession laws.  Often the default beneficiary would be the deceased owner’s estate, in which case the account would ultimately pass under the deceased owner’s will, if any, or under the North Carolina intestacy laws, along with other probate assets, if the decedent had no will.

Perhaps the most important purpose of estate planning is to designate the persons who will receive the decedent’s assets after death.

Consequently, we recommend that you gather your asset ownership and beneficiary designation documents when doing your estate planning, to make sure that they dispose of your assets exactly as you want, and that they make proper provision for the possibility that beneficiaries may predecease you.  Your estate planning attorney can name alternate beneficiaries for each devise under your will and for your residuary estate, and can verify the survivorship or beneficiary provisions of assets not passing under your will.