Planning for Contingencies in Your Will or Trust

An important part of estate planning is anticipating contingencies. For instance, say you make a will leaving your entire estate to your only child. You should also anticipate a situation where your child dies before you by naming a contingent beneficiary–i.e., who will inherit your estate if the originally named beneficiary is not available.

Florida Appeals Court Sorts Out Complicated Trust Distribution Case

When planning for such contingencies, however, it is crucial to be as clear as possible in the language you use in your will or trust. As with many aspects of estate planning, ambiguity can lead to differing interpretations–which in turn may prompt litigation among your potential heirs.

Consider this recent case from the Florida Second District Court of Appeal, Ebeling v. SunTrust Bank. The appeals court was effectively asked to decide whether an anticipate contingency actually occurred. The judges decided it did not occur.

Here is a brief explanation of what took place. A man named Richard died in 1992. He previously formed a trust as part of his estate plan. The trust provided that if Richard’s wife did not survive him, the income from the trust should be paid to his daughter, Jean, for the remainder of her life. Upon Jean’s death, the trust’s income would be paid to Jean’s children, Sarah and Carl, until the youngest grandchild turned 35. At that point, the trustee was required to distribute the principal of the trust to the grandchildren (or their own children).

In the event none of the above-named persons were alive at the time of the distribution, the trust named three contingent beneficiaries.

So what happened? The grandchildren, Sarah and Carl, died in 1986 and 2006, respectively. Carl was 37 years old at the time of his death. Jean argued this meant Carl’s estate was the sole beneficiary of Richard’s trust, as Carl reached the age of 35 before he died. The contingent beneficiaries disagreed. They argued that since Jean was still alive at the time of Carl’s death, the trust was not yet ready for distribution according to the terms established by Richard.

To further complicate matters, Jean died in 2014 while her lawsuit was pending. Her estate continued the case. A trial judge in Pinellas County determined the contingent beneficiaries interpretation of the trust was correct. But the Second District reversed, siding with Jean’s estate.

The appeals court explained that under Illinois law–which applied to the terms of this trust–it was clear that Richard’s intent “was to distribute the [trust principal] to Jean’s children at the specified times and pending that distribution, direct how the Trust income was to be paid.” In other words, Jean did not have to die before her children would receive their shares of the trust. The distribution was supposed to occur when the youngest grandchild–or in this case, Carl, as the only surviving grandchild–turned 35. The contingent beneficiaries were only entitled to the trust if there was no survivor among Lydia (Richard’s wife), Jean, Sarah, Carl, or any of their descendants at the time the distribution should have been made.

Speak with a Florida Estate Planning Lawyer Today

Obviously, it is not possible to plan for every contingency. But you can still take reasonable steps in your will or trust to ensure there is no question as to who should inherit your estate. If you need assistance from a qualified Fort Myers estate planning attorney, contact the Kuhn Law Firm, P.A., at 239-333-4529 today.

Source:

2dca.org/content/download/526782/5852616/file/173434_39_06072019_08490991_i.pdf

https://www.kuhnlegal.com/the-legal-risks-of-revising-your-estate-plan/