When most people create an estate plan, they assume their chosen beneficiaries will live long enough to enjoy assets they have placed in a trust on their behalf. The unfortunate reality is that some beneficiaries pass away before they ever inherit.
You have options when it comes to creating contingency plans and ensuring your final wishes are adhered to even if the unthinkable happens. One of those options is naming successor trust beneficiaries, and you can talk to our skilled beneficiary designation attorneys to learn more about this approach.
When you place your assets in a trust as part of your estate plan, you are required to name a beneficiary. That party is designated to inherit some or all of the assets held in the trust at a set time; usually upon the death of the grantor. A successor beneficiary is a contingency plan in case the original beneficiary passes away or is otherwise no longer eligible to inherit.
Because of the risk of this situation playing out, trusts frequently name successor beneficiaries. A secondary beneficiary is a person named by the trust document as a backup plan and they are not in line to inherit anything from the trust in most cases. However, they step into the shoes of the original beneficiary if anything happens to them.
The specific language of the trust document will determine what happens after a beneficiary dies before the trust is administered. If the document names a successor trust beneficiary, they will step into the position of the original successor and inherit instead.
While naming a successor is a common solution to this issue, not every trust takes this approach. Some trusts might instead name multiple beneficiaries who will get a larger share of the assets if one of them passes away.
There are options on the best way to proceed, but the most important thing is to work with legal counsel who can help you find the right approach. It is possible to build in multiple safeguards to ensure your wishes are respected after you are gone.
In the past, the death of a trust beneficiary would cause the assets they were set to inherit to revert back to the estate. This is a worst-case scenario in some situations, as it could require the opening of a probate case and initiate major tax consequences. In some situations, a lapsed trust could completely foil your final wishes by allowing unwanted heirs to inherit your property instead of your chosen trust beneficiaries.
To avoid this issue, Florida has adopted an “Anti-Lapse Statute” for trusts. Under this statute, the heirs of a deceased beneficiary will generally inherit instead of the assets reverting back to the estate. There are some limitations that apply to this statute on who can benefit, making it crucial for you to speak to an attorney about your options. The right legal counsel can advise you on how the anti-lapse statute works while also drafting an estate plan with safe guards that make it unnecessary to begin with.
Whether you are creating a trust or have been named as a beneficiary, it is important to understand why successors are important. Successor trust beneficiaries can prevent an estate plan from unraveling following an unexpected passing of one of your heirs in Coral Gables. To learn more about your options, reach out to our estate planning firm for a private consultation today.
We evaluate your case and determine how we might be able to help.
We will meet with you to discuss your next options and lay out a plan.
Our team guides you throughout the process so you feel confident about your choices.
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