Promise Law’s estate planning and trust tag line – Life happens. Plan on it.™ – wasn’t the result of a focus-group. Instead, it comes from our lived experience as well as the lived experience of those who we are honored to call our clients and friends.
But what happens when “life happens” and there are no plans? Or when “life happens” and the plans are insufficient, inadequate, or outdated?
First, take a deep breath. Stress tends to make one feel isolated, but chances are good that you aren’t the first person to be in this situation. Second, gather as much information as you can about the situation. Third, call us for an appointment to discuss your options. It may well be that Virginia law offers an avenue that might allow the situation to be fixed or accommodated.
In the first edition of this “Life Happens” series, we discussed what happens during one’s lifetime if one cannot make one’s own medical decisions or manage one’s own finances. This edition discusses potential fixes when “Life Happens” events intersect with a Trust.
A Trust is a type of estate planning legal entity that owns assets. Trusts have three types of parties, the Grantor (sometimes called the Settlor), the Beneficiary, and the Trustee. The Grantor sets up the trust, customizes the trust’s rules that apply during lifetime and after death, and (usually) funds the trust with the Grantor’s assets. The Beneficiary benefits from the assets in the Trust. The Trust has current beneficiaries and future beneficiaries, who may be different. The Trustee holds the legal title to the assets in the Trust and follows the Grantor’s rules (and applicable state and federal law) to use the Trust assets for the benefit of the Beneficiary. During the lifetime of the Grantor of a revocable living trust (RLT), all three roles are often filled by the same person because the Grantor serves as Trustee and is also the Beneficiary of the RLT.
An Existing Plan is Insufficient, Inadequate, or Outdated
If the Trust contains ambiguous language or if a beneficiary is not adequately identified (Was niece Sue supposed to be cousin Sue? Which cancer organization was to receive the money?), then the Executor or Trustee can file a petition for aid and direction with the appropriate circuit court to get guidance on interpreting the challenging or ambiguous provisions.
If the Trustee nominated in a Trust document has died or is unable or unwilling to serve and no successor is named, then the beneficiaries may be able to nominate a successor who can then administer the assets in accordance with the governing document; barring that, the Court can appoint a successor trustee.
If a Trust beneficiary cannot be located, then the proceeds may be able to be paid to the clerk of the circuit court that has jurisdiction to hold for the beneficiary for a period of time until the funds escheat (revert to the ownership of) the state.
If the Trust does not contain protective language for a beneficiary with disabilities, then depending on the amount and whether or not the inheritance would jeopardize the beneficiary’s needs-based benefits, several options may be evaluated:
the inheritance may be able to be held in a protective arrangement with the clerk or court or by another means,
the Will or Trust may be able to be reformed by the Court upon petition,
a conservator may be appointed to receive and manage the money and/or set up a Special Needs Trust on behalf of the individual, or
if the beneficiary’s disability is a legal one because they are under the age of 18 years old, then the appointment of a guardian of the minor’s estate may be necessary so someone can receive and manage the funds until the minor child becomes 18 years old.
If Trust beneficiaries want to make certain modifications to a trust, then they may be able to petition the Court to allow the modifications or may be able to make them by agreement.
Contact Our Trust Attorneys Today
You will note the use of “may” throughout this article. May is an intentional word choice because the smallest change in facts can make a large difference in the outcome. Although no lawyer can guarantee you will be able to achieve the results you want when there is no plan in place or when the plan is insufficient, inadequate, or outdated, you may have options. Call Promise Law at (757) 690-2470 for an appointment to discuss your specific situation.