When planning your estate rarely will you experience difficulty naming your initial beneficiary or beneficiaries for your Will, IRA’s or life insurance. This observation is almost certain when it comes to designating your spouse if you have been in a long standing committed relationship. Also, when it comes to naming successor or contingent beneficiaries in the case where you have children they are also commonly named as next in line to succeed to the estates of yourself and your spouse. More often than not children inherit equally although this is not required and is not always the case. To avoid conflict parents often decide to name the children equally even where they would prefer a greater share to go to one or more of their children or they perceive greater need. This is a matter of individual preference.
After these observations, however, as you continue down the line naming successors to inherit unexpected stumbling blocks can be encountered.
First, consider the difficulty you might experience in naming a beneficiary who is disabled. This can relate to children, grandchildren and more distant relatives and friends and even to spouses if your spouse is on Medical Assistance or some other needs-based benefit. It may be necessary to determine whether inheritance intended to assist that person could cause problems if he or she is determined to be “over resourced” for a federal, state or charitable benefit. Here, professional advice and more complete knowledge and understanding of the benefits received by that individual can be critically important in determining whether that person can receive an inheritance of the type desired. In some cases a supplemental needs trust might help. In other cases smart advance planning with professional assistance can make the difference. Note that if the disabled person’s only benefit is Social Security Disability (SSD) (not Supplemental Security Income (SSI) or some others), then the person is free to inherit without a trust and it will not affect benefits. Individuals on Social Security Disability recipients, in addition to their having been determined to be disabled simply cannot work in “substantial gainful employment.” Sheltered workshops can be ok and some limited work to a given dollar amount may be ok but inheritance would not affect his/her Social Security benefits.
Another issue that can arise in naming successor and contingent beneficiaries is the choice of a trustee or manager to handle funds when a beneficiary is, either because of minority or disability, unable to receive the inheritance directly. Sometimes a grandparent can be reluctant to name a son-in-law or daughter-in-law as a trustee for minors if their daughter or son predeceases and the inheritance is intended for minor or disabled grandchildren. This might have to do with experience regarding how the funds will be used or whether the person has shown good judgment in money matters. The same concern could relate to whether a son or daughter would use good judgment. Note that some parameters could be stated in the Will or in a Trust for grandchildren regarding the use of the funds. Also, if a supplemental needs trust is established it is important that the Trustee understands what he/she can and cannot do. I have often written about Letters of Intent that describe some of the things that can be done with a supplemental needs trust. Sometimes people unaccustomed to these responsibilities might be overly conservative or overly generous with use of the funds. Professional advice can be important here and there are some professional organizations with experience that can help.
Finally, individuals drafting their Wills can, quite literally, run out of beneficiaries. Some of the friends and family they would otherwise name have passed before them. Sometimes the person simply cannot think of anyone in need to inherit. In cases such as this he/she might specify bequests to more remote acquaintenances, relatives or friends. He/she might also become susceptable to scams or newly acquired but not necessarily genuine friends from whom they need to be protected. Hopefully they have real family and genuine friends to support and assist them in this case. One avenue that has not been explored here is contribution to charities. Testamentary gifts to deserving charities can continue to benefit those causes important to the testator/testatrix during life and make a genuine difference in the lives of others.
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.