What Happens if Trust Beneficiary Dies
A trust is one of the most popular ways an inheritance is passed on to the next generation because of the security that it provides. It assures the person who created the trust that the money will be managed safely and will not be accessible to just anyone.
Although, the beneficiary could ultimately get the money lump sum, it will not be without discomfort and the courts will have to get involved which also adds to the safety nets.
One of the major concerns of a trust is what will happen if the beneficiary of the trust dies especially if the person is the sole beneficiary.
There are several factors that could affect what will happen.
1. What is written on the trust? A well drafted trust should have been able to anticipate events like this. There should be a provision that details how the trust is going to be managed if something like this happens.
2. State / Federal Law. If the trust is silent on the matter, the court will have to decide on how it is going to be managed and the court will most likely defer to what the law says about the matter. Each state has a different ruling on this matter. It could be one of the following:
- Reverts back to the estate of the person who created the trust. When it is a living trust, the whole thing could be added to the estate of the person who created it. It will become a part of the whole estate and will be managed according to the provision of the estate
- It is also possible that it will be transferred to the beneficiary’s nearest of kin. There are states that recognize the rights of the beneficiary’s beneficiary. When the main beneficiary dies, he will have his own estate and may bequeath some properties to his nearest of kin. That may ultimately include the benefits he gets from the trust
Ultimately, you need to make sure that your trust provides for such a scenario and different other scenarios. Don’t write the provisions of your trust yourself. Hire a lawyer that will write it for your especially if you have a significant estate.
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