What Happens to a Beneficiary’s Inheritance if the Beneficiary Dies before the Inheritance is Disbursed?

beneficiary inheritance process

It’s far easier for the executors and family of a deceased person if there is a will, especially when it comes to disbursing the estate to named beneficiaries. However, in some cases, a beneficiary may die before receiving their inheritance. This is usually due to the fact that with some estates, probate can take up to a year or longer before the executors are able to distribute it according to the deceased’s wishes.

So, what is the beneficiary inheritance process and what happens if the beneficiary dies before they can receive their inheritance?

What is the beneficiary inheritance process?

The beneficiary inheritance process occurs when someone dies, and their estate goes through probate. Most deceased’s estates have to go through probate and include the administering of all financial and physical assets, such as property, and how it is distributed to the beneficiaries. 

If the deceased left a will which details the beneficiaries of the estate, i.e. who is going to inherit what, the beneficiary inheritance process can take up to 12 months to complete.  However, if the deceased didn’t leave a will, probate can take much longer.  What will delay the process even more, is if there are any disputes between the beneficiaries or over the administration of the estate, which is known as contentious probate

There are cases where probate is not required, particularly since the probate rules have changed recently. These situations are:

  • The estate is valued at less than £10,000, and there are no shares or land as part of the estate.  If the estate is particularly small and there is only a token amount in a bank account, the bank has the discretion to decide if they require a Grant of Probate to release the funds to beneficiaries.
  • If there is any money, i.e. in bank accounts, or property is jointly owned with a spouse or civil partner. In reality, the threshold where probate is not required ranges from £5,000 to £50,000.  Each bank or financial institution has its own policies regarding a deceased person’s assets.

If there is a will, an executor, or executors (it is standard practice to have more than one executor), they will have been named in the will by the deceased, and it’s their job to administer the estate and apply for Grant of Probate.  The executor(s) can be a family member, a friend of the deceased or the solicitor that holds the will, but not a beneficiary.  If there is no will, someone representing the deceased will need to apply for the authority to administer the deceased’s estate from the court.  This is usually the next of kin, and they will need to apply for a ‘grant of letters of administration’. 

There are some situations where letters of administration are also required:

  • You have been left the entire estate;
  • There are no executors named in the will;
  • The executors are not prepared to accept the role.

What happens if a beneficiary dies before they can receive their inheritance?

In some circumstances, it may happen that a beneficiary dies before the deceased’s estate has been granted probate or before the process of administering the estate has been completed to the point of disbursement of inheritance to beneficiaries.

Generally, if this happens, the beneficiary does not receive their inheritance, and it passes back to the estate to be re-distributed between the other heirs. However, there are some situations where this can cause confusion, such as survivorship conditions.

  • Survivorship conditions – many wills today include a survivorship clause which states that the beneficiary must survive the deceased by a certain period of time, usually 28 days before they can receive their inheritance. If this doesn’t happen, the beneficiary could be treated as though they had died before the deceased. If there is no will, the Rules of Intestacy also includes this cause and means that the deceased’s spouse or civil partner must also survive by 28 days or more to be allowed to inherit the deceased’s estate. In most cases, if the beneficiary has survived the deceased by 28 days but later dies before the estate is finalised, their share of the inheritance usually passes to their own estate and is then subject to the terms of their own will or Rules of Intestacy if no will.
  • Beneficiary dies before the deceased – if a beneficiary dies before the deceased, their inheritance (‘gift’) lapses, i.e. fails, and they do not inherit their share of the deceased’s estate. Their share goes ‘back into the estate’s pot’ and will be redistributed between the other beneficiaries. However, if the deceased thinks this may happen, they are entitled to make a provision for this situation in their will. They can redirect that beneficiary’s share of their estate to another specific beneficiary, such as a charity or another family member. There are also other circumstances when this can happen:
    • The will includes a gift to a child, an adopted child or a grandchild of the deceased.
    • The child dies before the deceased and leaves children of their own.
    • The children of the intended beneficiary are living at the time of the deceased’s death.

In these situations, the inheritance passes to the beneficiary’s children, but this      does depend on whether or not there is an expressed wish to the contrary.

The best option is always to seek professional advice if you think this may happen in your circumstances or you want to make sure your will provides for this potential situation.

At Probates Online, we offer a will writing service or a Complete Estate Service to help you through the probate process and estate administration upon the death of a loved one. If you are looking for advice on inheritance tax, gifts or trusts, or need to apply for a Grant of Probate, Letters of Administration, or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.