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Money August 2017

Legal Ease

You’ve Got to Name Names to Make Your Wishes Clear

By Jonathan J. David

If you simply tell your children that you want them to give a portion of their inheritance to their children, there is no guaranty that they will actually do that and they are not legally required to do so.

Dear Jonathan: I am a widow and I have four children. I am working on updating my will. I am stuck on trying to figure out who I should name as my beneficiaries. I plan on naming my children, but I also want to leave something to each of my grandchildren. Do I have to specifically name my grandchildren as beneficiaries or can I just tell my children that I want them to give a portion of their inheritance to their children?

Jonathan Says: From a legal perspective, you have to specifically name your grandchildren as beneficiaries if you want them to receive a portion of your estate. If you simply tell your children that you want them to give a portion of their inheritance to their children, there is no guaranty that they will actually do that and they are not legally required to do so.

You indicated that you are updating your will, but depending upon the size of your estate and the number of beneficiaries you have, you may want to consider setting up a trust for the distribution of your estate, rather than having your assets go through probate first before being distributed to your beneficiaries.

Also, if you are not already working with an estate planning attorney, I recommend that you do so. An attorney can answer your questions and make recommendations based on what you are trying to accomplish. Further, an attorney can help determine whether a trust makes sense for you, as well as review with you other types of estate planning documents that you should consider, such as financial and health care durable power of attorneys. Finally, an attorney can make sure that your estate planning documents are properly drafted. Good luck.

 

Dear Jonathan: I am a 45-year-old divorcee and recently prepared my first estate plan. Along with a will and power of attorney documents, I set up a trust and based on my attorney’s recommendations, I retitled my home and the bulk of my other assets to my trust. He explained to me that this was the best way to go to avoid probate, but here I am two weeks later having a mini panic attack because I don’t understand why I did that. If my trust now owns my assets, does that mean I have to go to someone else to get permission to access those assets? I have worked very hard to acquire what I have and I do not want to have someone else tell me what I can and cannot do with my property and investments. Also, what if I want to change the terms of my trust or decide I don’t want it anymore? Can I do that or am I stuck? Please tell me that I didn’t make a mistake.

Jonathan Says: It appears from the information you provided in your question that you created a “revocable trust,” and if my assumption is correct, you can relax. A revocable trust is a common planning tool used to avoid probate. This type of trust can be amended or revoked at any time so long as you have mental capacity. Further, assuming you are the trustee of your trust, and I cannot think of a reason why you would not be, given your age; you have not given up any control of your assets and you have complete and total access to those assets even though they are in trust. In other words, no one else can tell you what you can and cannot do with your property or your investments; you remain in complete control of those assets.

If, on the other hand, the trust you created was an “irrevocable trust,” your concern would be justified because you cannot amend or revoke that type of trust. Further, once you transfer assets to an irrevocable trust, you lose all control of those assets; the trustee, who would be somebody other than you, would be in control of those assets. Again, however, based on the information you provided, it would appear that you created a revocable trust and not an irrevocable trust, so you haven’t given up any control of your assets or the ability to amend or revoke your trust.

Hopefully, this answers your question and puts your mind at ease. I encourage you to follow up with your attorney if you have any further questions or concerns.

 

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, PC, 1700 East Beltline, N.E., Grand Rapids, Michigan 49525.

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