Re-doing a trust, contingent beneficiary question

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Swampy
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Re-doing a trust, contingent beneficiary question

Post by Swampy » Wed Oct 17, 2018 8:18 pm

We are in the process of re-doing our family trust with a new attorney due to significant legal errors we found in the original trust done elsewhere.

The most daunting thing is the creation of a 'failure of beneficiaries' list, or a contingent beneficiary list.

I'm of the belief that it is better to 'spread' the wealth around to a number of personally known worthy individuals and reliably efficient charitable organizations so that no one individual or organization gets the bulk of the estate. I created a list that would have provided a significant number of entities with 5 to 6 figure endowments, but the new attorney said the list was 'too long' and needed to be cut back to a 'manageable number.' In my case, he recommended cutting the list by half and just doubling up the amount to the remaining entities. His rationale was that the terminal administration of such a long list of contingent beneficiaries would necessarily be expensive, time consuming and a big headache for the trustee.

To those who have trusts, how have you approached this and roughly how many separate entities are on your contingent beneficiary list irrespective of trust balance?

It is hoped that this is an exercise in futility. The reality of everyone in the immediate family getting wiped out all at once is slim, but still possible. Witness the recent limo accident in New York state.

Your thoughts and input are greatly appreciated.

Thanks.
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

delamer
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Re: Re-doing a trust, contingent beneficiary question

Post by delamer » Wed Oct 17, 2018 8:41 pm

I have 6 contingent beneficiaries, all charities.

Gill
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Re: Re-doing a trust, contingent beneficiary question

Post by Gill » Wed Oct 17, 2018 8:48 pm

How about having a donor advised fund as a contingent remainderman? You can then name all the charitable beneficiaries you wish and easily change them at any time during your lifetime.
Gill

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Nestegg_User
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Re: Re-doing a trust, contingent beneficiary question

Post by Nestegg_User » Wed Oct 17, 2018 8:49 pm

We didn’t name specific charities in the trust document itself, rather we designated an amount to go to charities with a notation that a separate list would be provided.
We also stipulated that any beneficiary, including charities, that challenged the trust would immediately be eliminated from any benefits.

(It’s been rare, but a few colleges have actually called for an accounting of a trust “to insure that they got their fair share”.... that’s also why rather than a percentage it’s better to give a specific figure, as then once dispersed there was no option for challenge)

recent changes in the siblings families have created the need to redraft ours... but this next one will be simpler, even if the numbers are larger.
Last edited by Nestegg_User on Wed Oct 17, 2018 11:55 pm, edited 1 time in total.

LarryAllen
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Re: Re-doing a trust, contingent beneficiary question

Post by LarryAllen » Wed Oct 17, 2018 9:19 pm

The number of beneficiaries is only an issue if you are doing continuing trusts which I am sure you are not for charities. With continuing trusts there is a cost of administration. With checks, to be cut, after death the added admin costs are nominal for having more charities. Name as many as you want.

Swampy
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Re: Re-doing a trust, contingent beneficiary question

Post by Swampy » Thu Oct 18, 2018 6:44 am

Nestegg_User wrote:
We didn’t name specific charities in the trust document itself, rather we designated an amount to go to charities with a notation that a separate list would be provided. We also stipulated that any beneficiary, including charities, that challenged the trust would immediately be eliminated from any benefits.
This sounds like the best option for us. We have no interest in continuing trusts for others, whether individuals or charities. I don't know enough about a donor advised fund as a contingent remainderman, but it sounds like more work for us.

I will see what the attorney has to say about the separate list idea. The problem with contingent beneficiaries is that, over time, situations change and we would like the option to change our minds about who gets what without incurring another legal bill for document changes as we revisit the situation every so often.

We are still heavily insured (term life) and intend to let these policies lapse within 5 years. After these policies lapse, the amount to be distributed would be less and the number of contingent beneficiaries would probably change, too.

Any thoughts?
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

Gill
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Re: Re-doing a trust, contingent beneficiary question

Post by Gill » Thu Oct 18, 2018 7:33 am

Nestegg_User wrote:
Wed Oct 17, 2018 8:49 pm
We didn’t name specific charities in the trust document itself, rather we designated an amount to go to charities with a notation that a separate list would be provided.
We also stipulated that any beneficiary, including charities, that challenged the trust would immediately be eliminated from any benefits.

(It’s been rare, but a few colleges have actually called for an accounting of a trust “to insure that they got their fair share”.... that’s also why rather than a percentage it’s better to give a specific figure, as then once dispersed there was no option for challenge)

recent changes in the siblings families have created the need to redraft ours... but this next one will be simpler, even if the numbers are larger.
I have been involved with accounting to charities and they are often represented by attorneys to determine their correct distribution. Why should they be any different than individuals? Wouldn’t you want an accounting if you were left a fraction of the residue of an estate or trust?
Gill

Swampy
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Re: Re-doing a trust, contingent beneficiary question

Post by Swampy » Thu Nov 01, 2018 8:37 am

After sitting on it for two weeks, we decided to leave the contingent beneficiary list stand as is. As we allow term life policies to lapse, we will revisit the situation again in due time.

Does anyone know if we can modify the list ourselves at some future date or do we need to incur more legal expenses at that point?
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

LarryAllen
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Re: Re-doing a trust, contingent beneficiary question

Post by LarryAllen » Thu Nov 01, 2018 8:44 am

Swampy wrote:
Thu Nov 01, 2018 8:37 am
After sitting on it for two weeks, we decided to leave the contingent beneficiary list stand as is. As we allow term life policies to lapse, we will revisit the situation again in due time.

Does anyone know if we can modify the list ourselves at some future date or do we need to incur more legal expenses at that point?
You can amend a trust yourself. It might work out too. It will be determined after you die if it was done right.

delamer
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Re: Re-doing a trust, contingent beneficiary question

Post by delamer » Thu Nov 01, 2018 1:33 pm

Swampy wrote:
Thu Nov 01, 2018 8:37 am
After sitting on it for two weeks, we decided to leave the contingent beneficiary list stand as is. As we allow term life policies to lapse, we will revisit the situation again in due time.

Does anyone know if we can modify the list ourselves at some future date or do we need to incur more legal expenses at that point?
I would, at a minimum, make sure you have a couple of witnesses sign any changes.

I don’t know if this is sufficient but it is necessary (at least in my state).

WannabeAgAlum
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Re: Re-doing a trust, contingent beneficiary question

Post by WannabeAgAlum » Thu Nov 01, 2018 1:51 pm

Always prudent to have an attorney help with amendments of any sort unless instructed otherwise by the attorney if you want to minimize the possibility of confusion and extra expense. Plenty of examples of people DIY with seemingly simple amendments that just provides ammo for litigation.

Going back to original question, how likely is it that these contingent charitable beneficiaries will receive anything? Many folks spend lots of time on these questions when there is very little possibility of the provision ever being relevant. It may not be worth more than 10 minutes of your time.

Wannabe

Swampy
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Re: Re-doing a trust, contingent beneficiary question

Post by Swampy » Fri Nov 02, 2018 8:20 am

WannabeAgAlum wrote:
Thu Nov 01, 2018 1:51 pm
Always prudent to have an attorney help with amendments of any sort unless instructed otherwise by the attorney if you want to minimize the possibility of confusion and extra expense. Plenty of examples of people DIY with seemingly simple amendments that just provides ammo for litigation.

Going back to original question, how likely is it that these contingent charitable beneficiaries will receive anything? Many folks spend lots of time on these questions when there is very little possibility of the provision ever being relevant. It may not be worth more than 10 minutes of your time.

Wannabe
That assertion is absolutely correct, wannabe. However, by not having a contingency list, the estate would pass to individuals my spouse and I wish to exclude. Honestly, the likelihood is very small and growing smaller as the family spins off into their own orbits, hence we do not travel together. The highest risk was when we traveled extensively as a complete family unit, often by air.
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

RickBoglehead
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Re: Re-doing a trust, contingent beneficiary question

Post by RickBoglehead » Fri Nov 02, 2018 8:58 am

Smart creation of a trust (smart in your eyes, not necessarily the lawyer's eyes) allows you to create external lists that are part of the trust. If those lists are notarized and signed by witnesses, and then properly stored with the trust documents, you have no need to have a lawyer involved. Amendments can also be added in a similar manner, if you have confidence in what you're doing.

I have a relative that wanted to add a clause ensuring that her partner could remain in the home for a period of time if she predeceased him, and that the family would not kick him out. It specified what costs the trust would pay, and what costs he would pay, and how long the period would be. It was pretty clearly one-sided, i.e. allowing him to live with the trust largely supporting him living there for 6 months, but no agreement the other way, i.e. a contract requiring his estate to pay 6 months of his contributions should he predecease her. Given that he was contributing 20% of his costs, that wasn't a surprise. My point was that she wasted money having a lawyer draft an amendment (#4), that wasn't very good. I could have drafted a contract quite simply that said what each would pay if the other predeceased them, gotten both to sign and get it notarized, and the executors of each to receive a copy ahead of time. But no one asked me.

A great book to read is Living Trusts For Everyone : : Why A Will Is Not The Way To Avoid Probate, Protect Heirs, And Settle Estates by Ronald Farrington Sharp. He explains how some lawyers set things up to ensure future business.

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