The Collaborative International Dictionary of English v.0.48:

Lapsed \Lapsed\, a.
   1. Having slipped downward, backward, or away; having lost
      position, privilege, etc., by neglect; -- restricted to
      figurative uses.
      [1913 Webster]

            Once more I will renew
            His lapsed powers, though forfeit.    --Milton.
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   2. Ineffectual, void, or forfeited; as, a lapsed policy of
      insurance; a lapsed legacy.
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   Lapsed devise, Lapsed legacy (Law), a devise, or legacy,
      which fails to take effect in consequence of the death of
      the devisee, or legatee, before that of the testator, or
      for other cause. --Wharton (Law Dict.).
      [1913 Webster]

Bouvier's Law Dictionary, Revised 6th Ed (1856):

LAPSED LEGACY. One which is extinguished. The extinguishment may take place
for various reasons. See Legacy, Lapsed.
     2. A distinction has been made between a lapsed devise of real estate
and a lapsed legacy of personal estate. The real estate which is lapsed does
not fall into the residue, unless so provided by the will, but descends to
the heir at law; on the contrary, personal property passes by the residuary
clause where it is not otherwise disposed of. 2 Bouv. Inst. 2154-6.