 |
Planning your Will - Part 4 The Beneficiaries
Primary and Secondary Beneficiaries
Distribution Schemes & Scenarios
Applying to Challenge a Will
Special Arrangements or Restrictions
Distribution through a Trustee
Guardianship Selection
Special Donor Arrangements
Primary and Secondary Beneficiaries
Who are your primary and secondary beneficiaries? Depending on your family and personal situation, persons considered as potential beneficiaries in your Will can include your spouse, children, grandchildren, parents, siblings, nephews or nieces, friends, charities and other organizations, or any combination of them. Wills usually have more than one distribution scenario which can apply, depending on who survives the Testator or Testatrix.
Distribution Schemes & Scenarios
Wills drafting involves considering a number of "what ifs". With a traditional family unit, a Will usually provides for the residue of the estate (whatever is left after paying funeral expenses, debts, legal fees, etc.) to pass to the surviving spouse. If there is no surviving spouse, then the residue passes to surviving children, either equally or unequally. If a child predeceases, leaving surviving children, do the grandchildren take the deceased child's share? With younger families still living together, a Will should include a distribution scheme if there is a family disaster where no one survives. Obviously, different classes of beneficiaries will be considered as you wind through these kinds of scenarios.
Applying to Challenge a Will
As mentioned in previous articles, your legal spouse or legal children (natural or adopted) can apply to vary a Will which does not adequately provide for them. For example if a child of yours feels he or she has not be adequately provided for in your will he or she could challenge your Will using the Wills Variation Act, if your spouse survives and your Will provides that he or she receives the entire residue of your Estate without a present distribution to your child. Most Wills do not provide for children if a spouse survives and happily, most families get along sufficiently well so such problems do not arise. Other than Wills Variation Act considerations, you can generally decide who the beneficiaries of your Estate will be and how they share your estate.
Special Arrangements or Restrictions
Is it appropriate to have special arrangements or restrictions regarding the distribution of your estate? Family dynamics and the size of your estate usually govern whether your Will is simple or complex. If you are worried about your spouse's ability to manage finances without you, you could establish a life estate for your spouse. With a life estate, the liquid capital of your estate is held in trust and managed by a Trustee during your spouse's lifetime. The Trustee pays income, capital, or both, to your spouse as needs arise or for specific purposes. Fixed capital assets can be used by your spouse and replaced if necessary until he or she dies.
With a life estate, your Will should specify what happens to the residue of your estate upon your spouse's death. If your life estate provisions are too restrictive or objectively unreasonable, your spouse could use the Wills Variation Act to change them. If you have a substantial estate and you have children who are not financially responsible, or if you have concerns that they will not be financially responsible, trust provisions can be utilized to help protect against financial irresponsibility. Wills usually have trust provisions for infant children, but these trust provisions can be extended into adulthood by utilizing life estate provisions or alternatively trust provisions with staged payments of capital (for example: 25% of the capital at age 21; 25% at age 25; 50% at age 30 etc.).
Distribution through a Trustee
Trusts should designate the purposes for which distributions of income, capital or both can be made by the Trustee and specify who becomes entitled to the residue of the trust fund if the beneficiary dies before being entitled to receive the residue of the trust fund or before exhausting it (i.e. a "gift over"). If you do not provide for a gift over, an adult trust beneficiary can apply to the Court to collapse the trust and receive the money immediately. If you have a mentally disabled child who is receiving government assistance, you can utilize a discretionary trust to provide for your child without disentitling him or her from continuing to receive government assistance. This may not be a "politically correct" concept when deficit reduction is a primary topic of conversation; however, the focus is different if you are trying to preserve your estate for your child. If you want to make a bequest to a church, charity or other organization you can also do so by making a specific gift, a lump sum payment, or by establishing a trust fund.
The main concern is to properly identify the charity (i.e. the Interior Alzheimer's Foundation) and to provide what happens to the money if there is a risk the organization cannot be located or identified after your death or if it may dissolve prior to exhausting the trust fund established by you for it's benefit.
Guardianship Selection
Who will be the guardian of your infant children? A parent should always decide who would be best capable and willing to care for his or her infant children, and appoint the person(s) as the guardian(s) of those children in his or her Will. The surviving parent is usually the guardian who takes over after your death but you should prepare for what would happen if the other parent was not around to do the job and appoint an alternate guardian(s). You should always discuss this appointment with the proposed guardian prior to making your Will, because a guardian does have the option of turning the appointment down.
To avoid a conflict of interest and to divide the work and responsibility related to managing your estate and caring for your children, you should consider making the guardian(s) of your children someone other than the Trustee of any trust established for your children. The trust can provide for the payment of a fixed monthly sum to the guardian for child care expenses, or simply leave it to the discretion of the Trustee to decided how much should be paid to the guardian for the care and education of your children.
Special Donor Arrangements
Do you have special instructions regarding the disposition of your body? There are four basic choices you can make. The first is to decide whether you wish to be an organ or tissue donor, and if so, to what extent (i.e. organs only, or your entire body - yes, you can donate your body to science). If you are not going to donate your body to science, you can decide whether or not you wish to be cremated. Provisions in your Will dealing with the disposition of your body are not binding on your estate; however, they are normally followed by your executors, who, except with a bizarre request, usually feel duty bound to follow your wishes. Burial usually follows with a Will that mentions nothing about this issue.
This article is written by Roy Sommerey, one of our partners. The opinions set out in this article reflect generally on this area of law. The impact of the law on any given situation depends upon each individual's circumstances and the opinions contained in this article should not be relied on for assessing anyone's legal position. Advice should be obtained directly from your own lawyer regarding your personal situation.
|
|
|
