Making a living trust lets you avoid having your assets go through probate. Your living trust is a snapshot of which beneficiaries you want to inherit your assets at that particular time. You can name your contingent beneficiaries when you first create your trust. If you already have a trust in place, you can amend it to include a contingent beneficiary. Once you create your original trust or complete the trust amendment, your contingent beneficiary will inherit your assets according to your trust terms.
Contingent Beneficiary Defined
A contingent beneficiary receives your assets if the primary beneficiary is not able to receive them. For example, if the primary beneficiary dies before you, the assets pass to the contingent beneficiary you named in your trust. You can name more than one contingent beneficiary. In this case, your beneficiaries receive the assets in the order in which you named them. Your contingent beneficiary can be a person, a charity, an estate or another trust.
Choosing Contingent Beneficiary
Consider the way your primary beneficiary will receive your assets when choosing a contingent beneficiary. For example, if your primary beneficiary will receive $1,000 a month for 10 years, your contingent beneficiary will receive those payments the same way. If you name a minor as your contingent beneficiary, you need to appoint a guardian to manage the assets until the minor reaches legal age. Because many people name their immediate family as the primary beneficiaries, you may want to select close friends and relatives as your contingent beneficiaries.
Create Your Trust
You can name your primary and contingent beneficiaries when you create your trust. You need to decide who your beneficiaries are and what assets you want to leave to each of them. For example, say you want to name your sister as the primary beneficiary and your niece as the contingent beneficiary for a $10,000 gift. The trust must clearly identify that you are giving $10,000 to your sister as the primary beneficiary. Should your sister die before you, the $10,000 passes to your niece as the contingent beneficiary.
Amend Your Trust
Your attorney can draw up an amendment to add a contingent beneficiary to your existing trust. You need to provide your attorney with the contingent beneficiary’s legal name and current address. Before you sign, review the amendment to be sure it accomplishes your estate planning goals. If you made the living trust with your spouse or another person, she must agree to the amendment and sign it. The amendment is made part of your living trust and supersedes the original beneficiary designation.
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