When people in the Fort Pierce, Florida area create an estate plan, one of the issues they should be aware of is the idea of lapsed gifts, and the effect these gifts have on your estate and inheritance plans. Today in our ongoing series on basic questions about estate planning we are going to look at what lapsed gifts are, how they might affect your estate, and what you can do about them. As always, if you have specific questions or concerns about your estate or inheritance plan, you need to bring those to the attention of your attorney as soon as possible.
What is a lapsed gift?
As a person who creates an estate plan, you can choose to give inheritances to almost anyone you like. When you create a last will and testament, for example, all you have to do is name the individuals who you want to pass property to, known as beneficiaries or devisees, and state what gifts you want them to receive after you die. As a general rule, you are free to leave gifts to anyone as long as those people are still alive at the time you make your will.
But what if you make a will, name a devisee, and that devisee dies before you do? What happens to the gift then?
When this happens the gift or inheritance lapses. This means that because the intended recipient is no longer alive the gifts will revert to the estate and be distributed to someone else.
What is an anti-lapse law?
Many states, including Florida, have adopted laws that prevent lapsed gifts in certain situations. These are known as anti-lapse laws, or anti-lapse statutes. Though each state has a slightly different version of these laws, they generally operate in the same way. Namely, should you leave a will that gives a gift to a predeceased person, and there are no contrary instructions in your will, the gift will transfer to the predeceased devisee’s children or grandchildren as long as both you and the predeceased devisee shared at least a grandparent in common.
To help illustrate this, let’s take a look at an example. Let’s say that you create a will and leave each of your three siblings an equal portion of your estate. One of your siblings dies before you do, but leaves behind two children. Upon your death your two surviving siblings will receive one-third of your estate, while the two children of your predeceased sibling will split the one-third that predeceased sibling would have inherited. Therefore, each of those predeceased sibling’s children will receive a one-sixth share your estate.
On the other hand, let’s say that you left your best friend an equal share of your estate along with each of your siblings, but your best friend also predeceased you. In this situation, because you and your best friend did not have at least a grandparent in common, the gift to your deceased best friend lapses and reverts to the estate.