Most Recently Updated Saturday, December 9th, 2017, Naming Someone Else’s Trust as Beneficiary of Your Will.
Naming Someone Else’s Trust as Beneficiary of Your Will.
Naming Someone Else’s Trust as Beneficiary of Your Will; Not the Normal Path.
Inheritances are often left directly to a person. This inheritance form is called an “outright” distribution. At other times clients choose to have an estate held in Trust.
Trusts at their most basic are arrangements where one person, the Grantor, transfers an asset to a second person, the Trustee, to hold for a third person, the Beneficiary. In some Trusts, one person wears more than one of these hats.
For example when a parent forms a Trust for a child (Beneficiary) and names that child as the Trustee. Trusts can be Irrevocable or Revocable (sometimes called “Living Trusts”), complex or simple and serve a multitude of purposes. But typically if a client wants to give money in trust for a Beneficiary the client will create the Trust in the client’s Will.
What if a client wishes to make a gift in his or her Will into a trust formed by someone else?
The court addressed the question by Decree from the Orphans’ Court Division of the Court of Common Pleas of Chester County in the Estate of Elizabeth Harris, deceased. Thinking this case may have interest to you, I have written the following short article.
The relevant facts are as follows. At Mrs. Elizabeth Harris’ death, her Will gave her entire residuary estate to the Trustee of a trust created by her husband in 1980. After forming this trust, Mr. Harris died in 1983 and the trust sat empty ever since. Mr. Harris’ trust stated that all contributions to the trust were to be divided three ways, one share for each daughter from his marriage with Mrs. Harris and one share for his daughter from his first marriage. One of the daughters from the second marriage challenged the validity of the transfer from Mrs. Harris into the trust created by her husband arguing that because Mr. Harris did not fund the trust at his death, it could not be later funded by his wife. She claimed that only the children from the second marriage should inherit.
The executor of Mrs. Harris’ Will filed a Petition for Declaratory Judgment. Further, she asked the court to interpret the terms of relevant documents and give guidance for the estate’s distribution.
The Court Rules!
The court turned to Title 20 Section 2515 of the Pennsylvania Consolidated Statutes. The Statute states, “A devise or bequest in a Will may be made to the trustee of a trust, including any unfunded trust, established in writing by the testator or any other person before, concurrently with or after execution of the Will. Such devise or bequest shall not be invalid because the trust is amendable or revocable, or both. Or because the trust was amended after execution of the will. Unless the will provides otherwise, the property so devised or bequeathed shall not be deemed held under a testamentary trust of the testator but shall become and be a part of the principal of the trust to which it is given to be administered and disposed of in accordance with the provisions of the instrument establishing that trust and any amendment thereof.
An entire revocation of the trust prior to the testator’s death shall invalidate the devise or bequest unless the will directs otherwise.” 20 PaC.S. Section 2515 (emphasis added).
The court ruled that Mrs. Harris could leave her residuary estate to a trust created by her husband many years prior even though it had sat empty for nearly two decades after his death. The trust being unfunded was deemed irrelevant.
Naming Someone Else’s Trust as Beneficiary of Your Will; Get Good Advice!
Space here doesn’t allow me to give a great deal of detail. So, if you would like more information I encourage you to read more about estate planning options including more advanced ideas using Irrevocable Trusts or Revocable Living Trusts.
In this Post, I tried to introduce you to the ideas related to using trusts that you did not form as part of your estate plan. Further, I included links to even more detailed information on my website. So, let me know how I did, comments and questions are welcome!
Furthermore, I would be happy to answer your questions. If you have any other matters for a Philadelphia Estate Planning Lawyer, feel free to contact our office for a free consultation. We try to make the process as painless as possible!
Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!
Author, Peter Klenk, Esq.
Throughout our website, klenklaw.com, you may find more information about Estate Planning. Also, our firm focuses exclusively in the area of estate planning, probate, and the litigation surrounding estate planning and probate. This includes Will Contests and Will Challenges. Therefore, if you need assistance with any estate related matter call one of our Experienced Estate Planning Lawyers for a free consultation. We practice throughout New Jersey, Pennsylvania, New York, Minnesota and Florida.