Five Possibilities for Ownership of Assets When a Beneficiary Dies

When a decedent passes away, the estate and trust administration process begins. If the decedent had an estate plan that included a living trust, assets that are held within the trust will pass according to the trust document. Assets not held in trust will typically pass according to the terms of the will. Further, assets owned jointly or with a beneficiary designation may pass automatically upon the death of the decedent. To complicate matters further, a beneficiary may pass away before the decedent. When that happens, various scenarios may occur during the estate administration.

How Assets Pass When a Beneficiary Dies

When the beneficiary has passed away prior to the decedent, how the asset passes depends on many factors. One important factor is the way in which the asset was owned or held prior to the decedent’s death. Following are five examples:

  1. If the asset had an updated beneficiary designation in place, the contingent beneficiary will inherit the asset in the place of the beneficiary.
  2. If the asset was given to the beneficiary under the terms of the will, the will often directs who should take the property in his place.
  3. If the asset was given to the beneficiary under the terms of the trust, the trust document will typically state who should receive the asset.
  4. If the asset was owned jointly by the decedent and the beneficiary, it will become subject to the terms of the will and pass according to the instructions contained in that document.
  5. If the decedent, the beneficiary, and another party owned the asset jointly, it is possible that the asset will pass automatically to the surviving owner. This will depend on the form of ownership of the particular asset.

Determining what actions to take next during the trust administration process is not always simple when a beneficiary is predeceased. Interested in learning more helpful tips about modifying an estate plan? Sign up for our free newsletter today. We distribute our newsletter to our contacts throughout Orange County, California, and the rest of the nation—we encourage you to join our list.

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