Exploring Beneficiaries
A beneficiary of a trust is typically the grantor while they are alive, as the trust is designed for their benefit during their lifetime. However, upon the grantor’s passing, the contingent beneficiaries—those designated to receive the estate after the grantor’s death—come into play. Traditionally, grantors choose their own children as the contingent beneficiaries. However, the grantor can designate any family members, friends, or even charities to receive a portion of the estate.
Choosing Beneficiaries For Your Estate
When choosing beneficiaries for your estate, especially if you have children, it’s important to consider their financial responsibility and maturity. Ask yourself whether they will be financially savvy and responsible at the point in time they would receive the assets. You’ll also need to decide how to divide the estate among your children, whether equally or in specific percentages.
If you’re concerned a beneficiary would lack the maturity to steward their inheritance well, you may want to consider distributing it over a period of time, especially if you’re concerned about a beneficiary’s ability to manage a large sum. For example, you could distribute the estate in increments, such as 30% at age 25, another 30% at age 30, and so on. The ultimate goal in doing so is to ensure that they use the inheritance wisely and avoid potential pitfalls many fall into.
Common Mistakes When Selecting Beneficiaries
When selecting beneficiaries, avoid being too general. Clearly identify each beneficiary by providing their full name, address, contact details, and relationship to you. Vague statements like all my cousins get my estate are too broad and can create unnecessary confusion.
Also, be specific when designating charitable organizations. For example, stating $10,000 to the Red Cross is clear, but if you choose a lesser-known charity, especially one in another country, the executor may struggle to be able to identify it. Provide as much background information as possible to avoid any ambiguity that would prevent them from carrying out your wishes.
Additionally, consider whether your beneficiaries are financially savvy. If you have concerns, you might want to structure the distribution of your estate over time rather than giving them a large sum all at once.
Minor Children Beneficiaries
When naming minor children as beneficiaries, it’s important to understand that they won’t necessarily receive those assets while they are still minors. If they are under 18, and often until they are over 21 or 24, the assets will be managed by a trustee. The trustee will manage the trust’s assets and can use them to cover the child’s living expenses, college costs, and other needs. However, the child will not have direct access to the assets until they reach the designated age.
Changing Beneficiaries After Creating An Estate Plan
In California, you can change your beneficiaries at any point in time after you’ve created your estate plan. In fact, you can modify a trust, including the trustee, executor, fiduciary for your power of attorney, or advanced healthcare directive, too. Since it’s a revocable trust, you have the flexibility to amend or even revoke the entire trust whenever you choose.
Still Have Questions? Ready To Get Started?
For more information on Selecting Beneficiaries, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (510) 916-2100 today.
Ranvir Sandhu of Insight Legal in California has a wealth of experience guiding clients through the complex process of selecting beneficiaries for their estate plans. His personalized approach ensures that each client's unique family dynamics and financial goals are carefully considered, resulting in tailored solutions that protect their legacy and loved ones. Ranvir is committed to helping you create a clear and effective estate plan.
Secure your family's future with Ranvir's guidance today. Contact Insight Legal to get started.
