When the beneficiary died first

The gift usually does not fall back into the estate

A gift to someone who dies before the person who left it is said to lapse. Each of the 6 states read here has a statute that stops that happening in defined circumstances, by substituting the dead beneficiary's own descendants — so the share goes down that branch of the family rather than back into the pot.

Two things decide whether it applies to you, and only one of them is about the state. The first is how the dead beneficiary was related to the person who died. The second is which document names them, because a will and a beneficiary form are not governed by the same rule.

If the substitution applies, it beats both of the outcomes families expect. The share does not fall into the residue to be split among the surviving beneficiaries, and it does not go to the estate. It goes to the dead person's children, who may be people nobody at the table has spoken to in years.

Which relatives are protected

The protected class is narrower than 'family' and differs by state, and the differences are wide enough to change the answer for the same facts.

Arizona reaches a grandparent, a descendant of a grandparent, or a stepchild. A descendant of a grandparent takes in siblings, nieces, nephews and cousins, so the class is much wider than children — and the express mention of a stepchild is unusual.^{Source 1}

California is wider still. It protects a transferee who is kindred of the person who died, or kindred of a surviving, deceased or former spouse — but not a spouse. That reaches an ex-spouse's relatives, which is rarely what anyone intended and almost never what anyone expects.^{Source 2}

Florida matches Arizona's circle — a grandparent or a descendant of a grandparent — and applies it to a devisee under a will, and to an appointee where a power of appointment is exercised by will.^{Source 3}

New York is the narrowest of the four by a wide margin: the beneficiary must have been the testator's own issue, or a brother or sister. A niece, a nephew, a cousin or a friend named directly in a New York will is outside it, and the gift lapses where Arizona and Florida would have saved it.^{Source 4}

So the same will, with the same nephew named and predeceased, produces a substitution for his children in Arizona and Florida and nothing in New York. This is one of the sharpest state differences in the corpus, and it turns on a relationship no form asks about.^{Source 4Source 1}

A will and a beneficiary form are not the same question

This is where the money usually is, because most of what people own now passes by beneficiary designation rather than by will — retirement accounts, life insurance, payable-on-death accounts, transfer-on-death registrations.

Arizona's rule is written for beneficiary designations rather than for wills. Name your brother on a life insurance policy, have him die first, and the substitute gift is created in his surviving descendants: the money goes to his children, ahead of your estate and ahead of any other beneficiary you named.^{Source 1}

California's applies to a transferee under an instrument, which reaches beyond wills as well.^{Source 2}

Florida's and New York's do not. Florida's provision is about a devisee under a will; New York's is about a testamentary disposition. In those states a lapsed life insurance designation is governed by the contract — it goes to the contingent beneficiary, or to whatever default the policy sets, which is frequently the estate.^{Source 3Source 4}

The practical consequence for a family in Florida or New York: read the policy, not the statute. The document that decides is the contract, and the question to ask the insurer is what its default is where the named beneficiary has predeceased and no contingent was named.^{Source 3Source 4}

The words that switch the rule off

Anti-lapse is a default. The document can displace it, and in California the displacing words are ones people write without meaning anything by them.

California provides that the issue do not take where the instrument expresses a contrary intention or a substitute disposition — and that a requirement that the beneficiary survive the transferor, or survive for a period after the death, is itself a contrary intention.^{Source 2}

'To my brother, if he survives me' is a survivorship requirement. So is the box on a beneficiary form that reads 'if living'. In California those words disinherit the grandchildren the statute would otherwise have protected, and they look like boilerplate.^{Source 2}

Florida's provision applies unless a contrary intent appears in the will, and New York's applies unless the will provides otherwise, so both can be displaced too. What Sahvelo has established is the California rule that a bare survivorship condition is enough; whether the same short phrase suffices in the other three is not established here and should not be assumed either way.^{Source 3Source 4}

What to establish, in order

1. Identify the document. A will, or a beneficiary form? The answer decides which rule applies before anything else does.
2. Establish whether it is an employer plan or not. A 401(k) or workplace pension is governed by the plan document under federal law; an IRA, a privately bought policy and a payable-on-death account are not. This changes the answer more than the state does.
3. Establish the relationship between the person who died and the beneficiary who predeceased them. Child, sibling, niece, stepchild, spouse's relative — this is the test, and 'family' is not precise enough.
4. Find out whether the dead beneficiary left descendants. No descendants, no substitution, whatever the relationship.
5. Read the exact words of the gift or the form for a survivorship condition. In California those words are decisive.
6. Where it is a beneficiary designation in Florida or New York, ask the institution what its contract does with a lapsed designation and whether a contingent was named.
7. Do not distribute on the assumption that the surviving named beneficiaries split the share. If a substitution applies, that distribution is wrong and the executor made it.

Professional help is worth it where a substitution would send a share outside the immediate family, where the words of the gift are ambiguous, where the dead beneficiary's descendants are hard to identify or trace, or where the asset is an employer retirement plan and the plan document sends the money somewhere the family did not expect.

If the asset is an employer retirement plan

Everything above describes state law. An employer retirement plan — a 401(k), a pension, most workplace accounts — sits under a federal statute that supersedes state laws insofar as they relate to the plan. A state anti-lapse rule that redirects who a plan pays is, on the face of that language, a state law relating to the plan. So the state answer on this page cannot simply be carried across to a 401(k).^{Source 5}

What replaces it is more concrete than it sounds. The plan's fiduciary is required to act in accordance with the documents governing the plan, which means the administrator is directed to the plan document and the designation it holds — not to a will, not to a family agreement, and not to a state statute the family cites. In practice the plan document decides what happens when a named beneficiary dies first, usually through a contingent beneficiary or a default order of payment.^{Source 6}

Before reading the plan document, check one thing that often answers the question outright: was the person married? On a typical employer plan the surviving spouse is the default death beneficiary, and naming anyone else is only effective with that spouse's written consent, which must name a beneficiary that cannot then be changed without further consent and must be witnessed by a plan representative or a notary. So where a named beneficiary died first and the participant was married, the money may never have been going anywhere but the spouse — no anti-lapse rule, no contingent beneficiary and no state statute required.^{Source: 29 U.S.C. §1055 — survivor annuities and the spousal consent requirement (opens in a new tab)•}

This makes the plan document the thing to obtain, and you are entitled to it. A plan must furnish its governing documents to a beneficiary who asks in writing. Ask for the plan document and the summary plan description, in writing, and ask specifically what the plan does where a named beneficiary predeceased the participant and no contingent beneficiary was named.^{Source 8}

An IRA is not the same account

The distinction that resolves most household confusion is that an ordinary individual retirement account is excluded by regulation from the federal definition of a pension plan, provided the employer makes no contributions, participation is voluntary, and the employer's involvement goes no further than payroll deductions. So a family holding both a rolled-over IRA and a workplace 401(k) can get different answers about the same predeceased beneficiary, and both answers can be right. Where an employer contributes to the arrangement, that exclusion does not apply.^{Source 7}

What remains genuinely unsettled, and Sahvelo states rather than hides: whether a particular state statute is superseded in a particular application is decided by courts case by case, and whether someone who has already received plan money can afterwards be sued under state law to hand it over is a separate question again. Sahvelo has read the statute and the regulation, and has not read the case law at an authoritative source. Where the sums are material and the plan's answer sends the money somewhere the family did not expect, that is the point at which a lawyer earns their fee.