The story is set in England. The White family is with their son, Herbert, by the fire, and Mr. White's friend gives him what he thinks is a monkey's paw that grants wishes, however, the last person that used it's wish was death.
So, the son (playing,) says, "Why don't you wish for 200 pounds?"
So Mr. White does. And nothing happens. The next day, he receives word that his son has died, and the worker's compensation that he gets is 200 pounds. He realizes that the paw works, but in a twisted way.
After that, while they are late at night grieving together, Mrs. White tells him to wish for their son back. So he uses his second wish and says, "I wish my son were alive again."
Nothing happens. Again. They go to bed, and then later hear a sharp rapping at the door. That's when Mrs. White realizes that Herbert probably had to rise from his grave two miles away and walk all the way to the house, which is why he wasn't there immediately.
Mr. White sees Herbert through the window, ready to let him in, when he realizes that his son has basically turned into a zombie, with no semblance of his humanity left. So the third wish that he used was for the death of his undead son.
And so the story ends. Happy ending, right? Lol.
