Why You Need To Name Alternates In Your Will.

I'm going to broach a subject that is never easy to discuss and may cause some discomfort: The possibility that one or more of your descendants may not outlive you. As stressful as this may be, it is something that you may need to consider when deciding what to do for obtaining your Will.

Alternate beneficiaries

It's never easy to think of your children not surviving you, and I'm not trying to be morbid here. In a perfect world our children will live well beyond us, their children will outlive them, and so forth. But tragic things happen, and it's smart to have alternatives in place when naming beneficiaries of your estate. What if your spouse predeceases you? Or if one of your descendants passes away before you do? Where do those shares go? What happens in the remote chance that several descendants are not alive to receive their inheritance?

By not planning for contingencies, if a child passes away before you do and the court has to make the decision, that deceased child's share may not be distributed according to your wishes. The court applies the laws of intestacy to that part of the Will that fails, due to there being no nominated contingent beneficiary.

 

Do you want the share to be passed down to the deceased child's children (per stirpes), or do you want it to be shared by your other surviving children? There are no wrong answers here--only you know what's best. It's important that you plan for it and talk it over with your attorney.

Alternate fiduciaries

When the time comes to administer your estate many years from now the personal representative you have nominated in your Will might not be available or able to serve. It's possible that the personal representative may choose not to serve, perhaps due to constraints in their busy life. Serving as a fiduciary is voluntary--choosing to bow out is their prerogative if their life is too hectic at that time or if it creates some hardship. And there is the possibility that your personal representative will predecease you.

That is why you should consider nominating at least one successor personal representative in your Will so that there is a backup person you trust to take care of your estate after you are gone. Because if your primary personal representative cannot serve and there is no nominated successor in your Will, the probate court will appoint one without your input.

The precautions outlined above for personal representatives should also be similarly applied to any custodians, guardians or conservators you have appointed in your Will.

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This subject is a lot to process and it requires some planning. Give it some thought as you complete the intake questionnaire prior to meeting with your estate planning attorney.

What's All This Per Stirpes Stuff, Anyway?

Estate planning attorneys have their own arcane jargon, and those outside the field might find some of it baffling. But having some idea of where you want your assets to go will help you put it all together when you meet with your attorney. Hopefully, this article can give you a little information to consider as you begin to set your estate plan in motion.

There are a couple terms often used in determining how one's assets shall be divided: per stirpes and per capita. These two often-confusing yet important terms can yield different outcomes for your descendants. Knowing which one is best for you and your family is a topic you can discuss with your attorney.

Per Stirpes: Each branch of the named person's family receives an equal share of the estate. If all children are living, each child would receive a share, but if a child is not living, that child's share would be divided equally among the deceased child's children. It is sometimes called "by right of representation." Per stirpes is by far the most common distribution method used in Minnesota.

Per Capita: This is a method of distributing property whereby the surviving descendants of a generation will share equally. It's sometimes called "per capita at each generation."

Below is an example of how assets would be distributed using each method:

The testator A dies, leaving the estate in equal shares to the 3 children, B, C and D. If all 3 children survive the testator, it won't matter if it's per stirpes or per capita--they each will receive a 1/3 share.

But in the illustration above, two of the children, B and D, predecease the testator. With per stirpes, surviving child C still gets a 1/3 share, but the shares that would have passed to B and D descend the "branches" to be divided by their respective children. Thus, B1 and B2 split B's share and each receive 1/6 of the estate, while D1 being an only child receives D's full 1/3 share.

In the case of per capita, C still receives a 1/3 share. But the remaining 2/3 of the estate is divided equally among all three of the grandchildren, yielding a 2/9 share for each. With per capita, D1 receives a smaller share than by per stirpes, and B1 and B2 each receive larger shares than by per stirpes.

Note: There is a potential tax complication that may arise if you leave direct shares to grandchildren and great-grandchildren using the per capita method and you still have children who survive you. This may result in the federal generation-skipping transfer tax (GSTT) on the shares distributed to your grandchildren and great-grandchildren.

An experienced estate planning attorney can help you create a strategy that helps preserve your assets for your loved ones.