02 Jun Lapsed Gifts: Estate Planning and the Unexpected… by Lindsay K. Young

When you die, you may have a plan for how you want your property to pass. You may have decided you want your child to inherit your car, or your spouse to inherit your home. You may have written out these wishes in a drafted will. But what happens if one of these beneficiaries dies before you?

Each state’s probate laws handle this situation differently. Under Texas law, if a gift under a will, other than a residuary devise, fails for any reason, that gift can “lapse” and, by default, become part of your residuary estate. Tex. Est. Code § 255.152. A “residuary devise” is a clause in a will that identifies the testator’s preference for who will inherit the residuary estate, the part of the testator’s estate that remains after the other bequests in the will are fulfilled.

Anti-Lapse Statute

However, Texas also has an anti-lapse statute that protects gifts made to certain family members of the deceased. Under this statute, if a will devises property to a descendant of the testator – a child or grandchild, for instance – or a descendant of the testator’s parent – such as a sibling, half-sibling, or their descendants – that gift will not revert to the residuary estate. Instead, it will pass to the descendants of the devisee. Tex. Est. Code § 255.153.

A hypothetical example will help illustrate how these statutes affect the passage of property under a will in Texas. Andy has two children from a previous marriage, Dora and Edgar, and is currently married to Bea, his second wife, who also has a child from a previous marriage, Frank. Andy and Bea have no children together. Andy owns a house as his separate property, but in his will, he leaves the house to Bea. The will also provides that the “rest and remainder” of Andy’s estate will pass to his daughter, Dora. The will does not devise any property to Andy’s other child, Edgar, or Bea’s child, Frank. Bea dies before Andy, and Andy does not change his will. Upon Andy’s death, who gets the house?

Under Texas law, the gift to Bea would lapse, since she is not a descendant of Andy or his parents, and her child, Frank, would not inherit any interest in the house. The house would instead pass to Dora as part of Andy’s residual estate.

Residual Clause

What if Andy bequeaths the house to his sister, Clara, and Clara then predeceases Andy? If Clara had children who survived Andy, the house would pass to these nieces and nephews. Under Texas’ anti-lapse statute, the gift would not lapse and become part of the residuary estate because Andy’s sister is a descendant of his parents. Instead, it would pass to his sister’s descendants. However, if Clara dies before Andy and does not leave descendants, Andy’s gift of the house to Clara would lapse, and the house would pass to Andy’s daughter Dora via the residual estate.

If Andy does not have a residual clause in his will dictating how the “rest and remainder” of his estate will pass, any lapsed gift would pass according to Texas’ laws of intestacy. In other words, under Texas law, the house, absent a residual clause in the will, would pass to Andy’s heirs-at-law as though he had left no will at all. Dora and Edgar, as Andy’s surviving children, would inherit the house in this case.

A well-crafted will can give the testator more control over how his or her estate will pass by providing alternative beneficiaries if a gift lapses. An estate planning attorney can help you navigate your state’s probate laws and craft your will to ensure that your estate passes in a way consistent with your wishes.

By Lindsay K. Young, Attorney at KMD Law