What Happens When a Beneficiary Dies Before You?

What Happens When a Beneficiary Dies Before You?

Imagine this: You’ve carefully made your Will, making sure your loved ones will be taken care of when you’re gone. You’ve left a generous gift to your child, Alex. But then, something unexpected happens—Alex passes away before you do. What happens to the gift you left to Alex? Does it just disappear? Does it go back into your estate? Or does it pass to Alex’s children? 

If you’ve ever wondered what happens in this situation, you’re not alone. In this scenario, the law has a built-in solution: the anti-lapse clause (sometimes called the substitutional gift rule). In South Australia this is section 31 of the Succession Act 2023 (SA) and section 41 of the Succession Act 2006 (NSW).  Other jurisdictions have reciprocal provisions.  These sections ensure that your gift doesn’t just ‘vanish’ but instead passes to your beneficiary’s living descendants. Here’s how it works. 

Make sure to read our article about changes to the Succession Act 2023 (SA) effective 1 January 2025, here. 

The Problem: When a Beneficiary Dies First 

Many people assume that when they leave something to a child or loved one in their Will, that person will receive it, no matter what. But if the beneficiary dies first, the situation becomes more complicated. Without the right legal protections, the inheritance could end up going to someone you never intended. In some cases, it could even return to your estate and be divided under intestacy laws, which may not reflect your wishes.

The Built-In Solution: The Anti-Lapse Clause 

Most States in Australia recognise this common issue and include an anti-lapse rule in their succession legislation.  This means if, you leave a gift to a child or other close descendant (sometimes called “issue”), and they pass away before you do, the inheritance doesn’t just disappear. Instead, it automatically passes to their children (your grandchildren) unless your Will says otherwise. 

So, in our example, if Alex passed away before you, Alex’s children (your grandchildren) will inherit the gift you originally intended for Alex. This happens even if your Will doesn’t mention them specifically. 

This outcome raises some other matters for you to consider.  If Alex has died before you:

  • Who should look after your grandchildren’s inheritance if they are under the age of 18?  The executor, their surviving parent, both?
  • If 18 is too young for your grandchildren to inherit, at what age do you want your grandchildren to control their inheritance?
  • How should your grandchildren receive their gifts? Do you want your grandchildren to receive the gift outright or in a protected and tax efficient way?
  • Do you want to direct your grandchildren’s inheritance to be used for a specific purpose, for example, education?

We can advise you about your options and make sure in your Will your gifting to your grandchildren does not spoil or disempower them; cause problems between them; and their surviving parent and is made in a protective and tax efficient way.

When This Rule Doesn’t Apply 

There are situations where the anti-lapse clause won’t apply: 

  • If you specifically say otherwise in your Will. If you clearly state that the gift should go to someone else if Alex dies first, then that instruction will be followed. 
  • If Alex didn’t have children. If there’s no one for the inheritance to pass to, it might go back into your general estate. 
  • You made a conditional gift. If your Will says Alex must “survive you by 30 days” to receive the gift, and Alex doesn’t, then the anti-lapse rule may not apply. 

How to Make Sure Your Wishes Are Followed 

The best way to avoid surprises is to be specific in your Will. You can: 

  • Clearly state who should inherit a gift if the primary beneficiary dies first. 
  • Mention backup beneficiaries (or contingent beneficiaries) to ensure there’s a plan B. 
  • Work with us to make sure your will reflects your true intentions! 

Final Thoughts: Protect Your Legacy 

Estate planning is about more than just writing down names and numbers—it’s about making sure your loved ones are taken care of in the way you want. Understanding how laws like the anti-lapse clause work can help you avoid unintended consequences.  When it comes to transferring your hard earned assets to the next generation there are plenty of similar tricks and traps for inexperienced players.  For that reason we encourage you to seek the help of an estate planning lawyer to help you prepare your Will rather than going it alone.

How we can help 

Do you want to ensure that when it comes to the passing on your assets you have considered all the possible threats to your wishes? Call us on1300 654 590 or email us and make an appointment.  We can answer your questions, correct erroneous assumptions, and give you the assurance that these documents which pass on ‘the farm’ (in some cases, literally!), do so effectively and to the people and in the manner, you intend.

The information contained in this post is current at the date of editing – 10 February 2025.

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