Now that you have chosen the estate planning instrument (a will or trust) that you will use and that you have chosen your trustee or personal representative, who do you want to leave your assets to? What good do you want to leave to each beneficiary? When should each beneficiary receive your property? The answers to these questions may seem easy – leave everything in equal parts for your children and let them understand the details. However, these questions require further analysis to ensure that your property is passed on to whoever you want, when and under what conditions you wish to pass it on to each beneficiary.
- Who receives your property?
Initially, it is easy to answer this question: my children will receive all my belongings. It's easy. But what if one of your children dies before you? Does this child have children? What about this child's spouse? Do you want the spouse to receive something?
What happens if, after executing your will or your trust, one of your children becomes disabled and receives government benefits? Do you want this child to receive his share of your estate, making him ineligible for government benefits?
Do you want to write one of your children out of your will or trust? Would it be better to leave something to this child while limiting his access to what you leave him?
A will or relationship of trust may be written to include answers to these questions, but these require the client to provide a thoughtful contribution.
Rather than ask who you want to receive your property from, I will sometimes ask who you do not want to receive your property from. If you do not want your son-in-law to lose his slippery fingers on your inheritance to his gambling habits, you will probably have to put your daughter's share in your estate. in a kind of underconfidence for her and the benefit of your grandchildren.
- What property does each beneficiary receive?
A common probate dispute concerns the recipient who gets what. This is not always a simple fight for worthless trinkets (although this is very common), it can also be a fight on many plots of real estate. A recent dispute that we dealt with concerned an estate consisting of the deceased's house and a few parcels of commercial buildings. The will provided that all children receive equal shares of the estate.
Not all children heard and the idea of making these children own their belongings together seemed impossible. A fight broke out over the distribution of the estate. A child did not want to be in business with his siblings or co-own many properties.
The deceased had a simple will in a situation where she needed something more complex that identified the specific property that each child should have received or who was distributing the property to a trust that would be managed by a professional trustee. A specific language indicating who would receive what specific property, or what would happen to the entire property if the children did not agree on the distribution, would probably have allowed everyone to save substantial attorney fees.
- When does the beneficiary receive the property?
The timing of a distribution can be extremely important. Do you want a beneficiary to receive the share of your estate from it immediately after your death, or even years later, if applicable? Many beneficiaries benefit from inheritance in a trust throughout their lives.
If a beneficiary is disabled, you will probably want to leave his or her share of your estate in a trust for extra needs (sometimes called a special needs trust) in which the beneficiary never receives his or her inheritance. Rather, he was placed in trust all his life.
If you have younger children, you probably will not want them to receive their share of your estate until they reach a certain age, such as 25, 30, 35 or 40 years. However, without proper planning, Oregon says that a child 18 years old, they can receive their share of your estate after reaching the age of 18 (except in limited circumstances). Most people do not like this result and include trust in minor children in their will or confidence to prevent this from happening. Using a trust for minors, a trustee (whom you name in your will or trust) will manage the assets of the trust for the benefit of the child and may use them to pay for health care, education, housing, etc. When the child reaches the age indicated, he receives all that remains to him.
In addition, you can leave something to a recipient who has spending problems, bets or excessive consumption, but you do not want that individual beneficiary to ever have control over the property you leave him. You can use a trust established for the life of the beneficiary, in which the trustee of the trust has absolute power over the distribution of the assets of the trust. The use of a trust saves you from having to disinherit a troubled child, but also allows you to keep some control over how it uses your property after your death.
You may also have a child who is a doctor, lawyer or other profession where potential malpractice or negligence claims could erase that child's estate. By leaving your child's estate in a trust for the benefit of the child and the benefit of his family (with an independent trustee), you may be able to prevent his creditors from receiving his inheritance.
Just as in deciding whether you want to use a will or trust and appoint your trustee or personal representative, the choice of your beneficiaries should be a thoughtful answer. There is no single answer and what works for one client may not work for another because families are unique.
© 20/02/2014 Kevin J. Tillson of Hunt & Associates, PC All rights reserved.