Comments on: Transferring Assets Upon Death With a Trust

By: Rich

Rich — Tue, 28 Apr 2009 13:38:36 +0000

Can you list a trust as a beneficiary and is this a good idea?

By: Jeremy

Jeremy — Fri, 21 Sep 2007 16:09:20 +0000

When talking about beneficiaries and contracts, yes, and that is typically the case because the asset is usually transfered to a new owner, who would then have to assign their own beneficiaries. Once the benefactor dies, the asset is either liquidated and given to the primary beneficiary (since it was liquidated, there are no more beneficiaries), or the asset remains intact, but now has a new owner, which would require the assignment of new beneficiaries.

I’m sure there may be some instances where the contingents may carry over, but with the types of accounts and assets I deal with, this is never the case.

Of course, I’m strictly referring to beneficiaries as it relates to contracts. Once you get into a trust, there are more intricate ways you can plan for contingencies. So the information you were reading was probably more related to establishing the chain of beneficiaries in a trust, which is more flexible.

By: Steve Austin

Steve Austin — Fri, 21 Sep 2007 14:55:48 +0000

I see; so the only contingency is death. When I stumbled onto the concept, I was thinking of a broader more intricate contingency, something like: “when I die, if [this] AND [that] happens within [this period of time], then [person A] is the beneficiary; otherwise [person B] is the beneficiary”.

But back to the death contingency, you’re saying that all contingencies expire/reset when the benefactor dies? In other words, each time the asset changes hands, prior beneficiary assignments are lost?

By: Jeremy

Jeremy — Fri, 21 Sep 2007 13:40:47 +0000

Contingent beneficiaries are common when there are children in the picture. For example, for the beneficiaries listed for a 401(k) plan, you are assign primary and contingent beneficiaries. Typically, someone would list the spouse as the sole primary beneficiary to receive 100%, and then list their child, or children as contingent.

The contingent is in force if the primary beneficiary is also deceased. This is a good thing to do since there are certainly possibilities where both parents could die together in an accident of some sort, so it could go directly to the children (or some other contingent beneficiary).

It is also worth noting that the use of contingent beneficiaries only works if the primary beneficiary is also dead. If the account holder dies, and the primary beneficiary receives the assets, it would be up to them to restate the beneficiaries as the contingents don’t automatically get “promoted” to primary in that case.

Good question, and that is something I should have addressed when discussing contracts.

By: Steve Austin

Steve Austin — Fri, 21 Sep 2007 13:04:30 +0000

Missed a word in my prior comment: how would you fit that approach into an estate plan?

By: Steve Austin

Steve Austin — Fri, 21 Sep 2007 13:03:36 +0000

I wanted to thank you for the two estate planning topics this week. I am still absorbing them.

In the meanwhile, I ran across a reference elsewhere to “contingent beneficiaries”. How would fit that approach into an estate plan?