Who Will Receive Your Property?
Beneficiaries of Your Will
Helen has questions that are very common. She is trying to decide who should be the beneficiary of her will. Plus, there are questions about how old children or other heirs should be when they receive her property or how she can best plan for someone to take care of the family dog.
You might have several different types of beneficiaries. There could be primary beneficiaries, contingent beneficiaries, life estate and remainder recipients, minors who receive income from a trust, debtor beneficiaries who receive forgiveness and restricted beneficiaries.
A famous American who included all of these types of gifts in his will was Benjamin Franklin.
Ben Franklin gave his son William all of his property in Nova Scotia "to hold to him, his heirs and assigns forever." Because William received the property outright, he was a primary beneficiary.
You might own specific property such as land, a home, or a family heirloom that you want transferred to a primary beneficiary. This is often the starting point for planning your estate distributions.
Franklin owned three homes on Market Street in Philadelphia, other property within Philadelphia and pasture land on Hickory Lane next to the city. He transferred the right to use that property together with his "silver plate, pictures and household goods" to his daughter Sarah Bache and her husband Richard Bache for use "during their natural lives."
This bequest created a life estate. You may have a home or other real property and desire for a person to use that property for his or her lifetime. A life estate is an excellent way to give a person life use of property.
After the lives of Sarah and Richard Bache, the property in Philadelphia that they used was transferred to their children. This property was then solely owned by the children.
Following a life estate, the property is usually transferred outright to the remainder or final beneficiaries. If you create a life estate for a person, then you may also designate a person or perhaps a charitable organization to own the property after your life tenant passes away.
Ben Franklin wanted to transfer property to his daughter and son-in-law for life, with the final distribution to their children. But what if one of the children were to pass away prior to the demise of both parents? Franklin indicated that if one of the children were "to die under age, and without issue," that share would be "equally divided among the survivors."
A contingent beneficiary is the person who will receive the property if the first person is not living at the time of the transfer. For example, you may wish to give a gift through your will to a brother or sister. But if he or she passes away before you do, then it is important to select another person to receive the property.
Trust for Minors
Ben Franklin understood that some of the children of his daughter Sarah might be quite young at the time when both parents pass away. He stated that some of them are "under age" and "may not have capacity" to manage the property. Therefore, he ordered the Supreme Court of Pennsylvania to select "three honest, intelligent, impartial men" to manage the property.
If you plan to assist young children, you will want to create a trust to manage property for the benefit of the children. Primarily, the trust will distribute income and, if needed, principal to the child until each recipient reaches your designated age for distribution of the assets.
Ben Franklin was like many parents in that he made loans to his children. As is quite often the case, he decided to forgive the loans and indicated he would discharge his son-in-law "from all claim and rent of moneys due to me."
If you have made loans to friends or family members, it is very possible that you may choose to forgive those loans. In effect, you are forgiving the debt and giving back the note or other obligation.
Ben Franklin gave away his printing materials and books and left several other bequests. However, it appears that he decided not to make any provision for a pet.
During the past few years, more than half of the state legislatures in the United States have permitted a plan to benefit a pet. The simple solution is for you to transfer a family pet to a friend and make a gift of sufficient funds to provide for care of the animal. Of course, you are trusting your friend to provide that care and to use the funds appropriately.
Some states also allow you to create a pet trust. A trust can be managed by a bank or a commercial trustee, or you can select a private trustee. The property that is transferred to the trust will be used for the care of your pet.
There have been cases in which a trust was created and the trustee was directed to continue payments to the pet caregiver as long as the pet should live. Perhaps not surprisingly, Rover seemed to survive for an unusual period of time. When each Rover passed away, the family replaced Rover with a dog of similar appearance and breed. So long as the new "Rovers" kept appearing, the trust income payments were made to the family.