FAQs on Beneficiaries, Charitable Gifts, and Your "Stuff"
- Advisors EP Support
- Jul 3
- 7 min read
Beneficiary Options, Special Needs Trusts, Household Items, Pets and Charitable Gifts
Here you'll find answers and best practices for each of these sections within our forms.
You will determine who gets the remainder of your trust estate first. Then, you can dictate what gifts, if any, come off the top (for example, $15,000 to charity). You can also leave certain personal property items in those specific gifts (jewelry, etc.).
Beneficiaries
Are the beneficiaries getting equal shares?
Most individuals answer "Yes" here.
If you select yes to equal shares then there is no need to determine how the estate will be divvied up. If you select no, we need to know how you want the estate to be divided, in a percentage or fractional format. ex. 50% or 1/2
However, extenuating circumstances may exist that won't make this option the best choice.
For example, maybe one child owes you $50K for a loan you provided to help with their start-up business. Maybe one of your children has predeceased you, and you are listing their heirs, your grandchildren, as beneficiaries. In that case, you might give 50% to your surviving child and 25% to each of the two grandchildren. There is no right or wrong answer here. It’s what best suits your needs.
If you want any future loans to children to be accounted for after your passing to equalizing the distribution to all beneficiaries, select yes when you are asked, "If any beneficiaries owe you money now or in the future, would you like to ensure a fair and equitable distribution of your assets?"
Designations/Provisions
Now, you will need to decide what happens to their share of the Estate should they predecease you. Your options are per-stirpes, lapse, and other.
Per Stirpes
This definition follows the beneficiary’s family tree, giving equal weight to each branch of that family tree. For example, if one of your two children receiving equal shares predeceases you and has two living children, their 50% share would be divided into two equal shares, 25% each, for their children. Per stirpes does NOT include a daughter-in-law or son-in-law or any grandchildren from an existing marriage that was not legally adopted by your beneficiary.
Lapse (Per Capita)
This definition states that if the beneficiary is deceased, that share goes back into the pot and is re-allocated among the other beneficiaries getting a percentage. For example, if you have three beneficiaries getting 50%, 25% and 25%, and one of the 25% beneficiaries dies before the client with a “lapse” provision, that 25% would be re-allocated pro-rata to the other two living beneficiaries. In this example, the 50% beneficiary would move up to 2/3 (or 66.67%) and the other 25% beneficiary would move up to 1/3 (or 33.33%).
Other
You also have the opportunity to dictate what you would want to have happen to this share if either of the two definitions do not fit your needs. For example, common provisions would be providing it to one of your other beneficiaries (versus all of them in a lapse scenario) or naming a charity to get that share. Depending on how complicated these provisions are, your plan may require enhanced review by one of our qualified estate planning professionals.
Do you want restrictions on the distributions to this beneficiary?
If You Choose "No"
You are stating that you would be okay with an adult beneficiary doing whatever they want with any inheritance they receive from you upon your passing. This is the most common approach for adult beneficiaries who manage their finances reasonably well. For any minor beneficiary their share of the trusts assets will be held in a sub trust and managed by the trustee until they reach the age of majority. For most states this is 18 years old, other are 19 and 21 years old.
If You Choose "Yes"
Several pre-populated restrictions are available. If none of these fit what you are looking for, select “other” and write in what you would like. Do this in the notes area for this beneficiary.
If You Choose "Yes" to Any Restriction
The default is that the trustee (person in charge of the finances) will be able to make payments for that beneficiary’s health care, education, and support (all defined terms in the estate plan documents) before the beneficiary reaches your determined age. The assets are NOT frozen! Your trustee can use the assets to pay for a beneficiary’s tuition, books, rent, insurance co-payments, deductibles, medication, a prom dress, the down payment on a home, their cell phone bill etc. Anything within reason. Resist the temptation to be too specific here – you put a trustee in place for a reason. You do not want to unintentionally limit your trustee’s ability to adjust to circumstances after you are gone.
Pre-Populated Restrictions
Age-Based
It is common for clients with younger children to choose one of the below options. Each beneficiary will have the opportunity to have payments made for their health care, education, and support (in the trustee’s discretion). However, these ages refer to when the beneficiary receives his / her inheritance.
The most common age-based restrictions other clients choose are:
1/3 at 25, 1/3 at 30, 1/3 at 35
1/3 at the earlier of an undergraduate degree or 25, 1/3 at 30, 1/3 at 35
1/2 at 25, 1/2 at 30
Special Needs Trust (SNTs)
A Special Needs Trust is utilized for beneficiary’s with needs-based public benefits (their eligibility is conditioned upon having very few assets). A special needs trust would be there to supplement this beneficiary’s current benefits (NOT supplant them).
If you are unsure if a beneficiary requires a special needs trust, the trust language authorizes the trustee to convert any share to a special needs trust if it is appropriate to do so after your death and you did NOT select this option.
Never in Control
This is used in extreme circumstances where you do not want a beneficiary ever to control their funds at any age. Use this cautiously as a trustee will be needed for that beneficiary’s entire life.
Other
Attained Goals
Please think very carefully before using attained goals. Here an example to illustrate why you might regret this later on:
1/3 upon earning a bachelor's degree, 1/3 upon the birth of their first child, and 1/3 upon purchasing their first home.
What if the beneficiary decides not to go to college because they would rather pursue a trade?
What if they do not want children? Or have one at 19? Or adopt?
What if they don’t want to buy a home because renting is wise for them in the long run?
An heir’s/beneficiary’s life will rarely go precisely as planned or expected. It might be best to give your beneficiaries the ability to live their lives without the fear of being disinherited. It’s best to make the distributions simple when possible. Remember, your trustee has to fulfill your wishes, however complicated they might be.
"In Trust" instead of "No Restrictions"
Listing "In Trust" (after selecting Other) instead of selecting no restrictions is more popular in community property states. (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin).
Our standard language already accounts for issues with addiction, divorce protection, creditor protection, spendthrifts, special needs, contesting the trust, and so much more. The terms within the trust allow the trustee, a beneficiary with no restrictions, or a beneficiary that has reached an attained age or goal to use their best judgment when assessing whether or not they will need their distributions delayed and/or placed in a separate trust.
What's the practical application?
Instead of accepting a partial or outright distribution (beneficiaries with “no restrictions”), this may help delineate between inherited and marital assets and prevent beneficiaries from commingling funds with a spouse. It can help if they have creditor issues, too. They can default to a sibling or other trusted individual to act as their trustee, which may help shield their assets from creditors. The main benefit of In Trust vs No Restrictions is time. This allows beneficiaries to take some time and consider the best approach for them at this point in their lives. There is no need to make a big decision right now!
Tangible Personal Property (TPP)
Try not to get too carried away with personal items in the specific gifts area. Your estate planner will provide you with a form to list personal property items, the Tangible Personal Property (TPP) form. Listing too many personal property items in the estate plan itself may lead to more amendments to the estate plan in the future. Therefor, the TPP is the best place to list these. You can change the form whenever you'd like, and it will not require an attorney or advisor to make the changes.
Good news- if you want everything to go to the beneficiaries you name in your estate plan and you don't care how they divvy it up- you can leave the TPP form blank. You'll only need to use the TPP form when you want a specific items to be given to a specific individual.
Specific Gifts
This is for real estate, large sums of money, and items of substantial value. For charitable gifts be sure to include a reputable organization or include that the successor trustee may choose an similar alternative if the organization of your choosing is no longer in operation.
Examples of what to include in Specific Gifts
$50,000 to Ducks Unlimited
$20,000 to Justin Jones
123 Happy Hilly Lane, Sunshine, FL 11111 - James Smith
Auguste Rodin - Mouvement de danse, étude type A, agrandissement - Kaitlin Jones
Below are several common mistakes made on vehicles, personal belongings, and pets.
Vehicles
In some states, it might be best to list your vehicles; however, it's usually unwise to list specific vehicles, i.e., 2011 Toyota Camry. What if the Camry is sold, breaks down, or you gift it in advance of your passing? If you acquire a new vehicle, the specific gift listed in the trust no longer accounts for your vehicle. Try this instead, i.e., "I leave my vehicle to my James Smith."
Personal Belongings
DO NOT list grandma’s punch bowl, your china cabinet, or golf clubs as specific gifts. Unless they are of substantial value, listing these on the TPP is best.
Pets
It's best to list pets as generically as possible. They may feel like a unique member of the family to you, but this can create issues later on. Generally, a pet's life expectancy is shorter than yours. Instead of listing pets individually, try to group them. You may have issues when listing specifics, i.e., Fido to Uncle Larry, Spot to Uncle Larry, $5,000 for Uncle Larry to care for Spot and Fido.
What if Spot dies, and you adopt two precious (you fill in the blank)?! The specific gifts listed in the trust no longer account for all animals; yay for Fido, boo for ____ and ____. Now, you may need to update the trust, too. Try this instead, i.e., We leave our pets and $ (you fill in the blanks) to Larry Smith.
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