Who Can Be a Beneficiary of a Trust?

trust attorney in Orange County

Trusts are part of estate planning. They serve as a secure holding pen where the trust creator transfers assets that are then protected from certain things like lawsuits. A trust attorney in Orange County will help you create a trust agreement that fulfills your wishes and meets state and federal requirements.

There are different types of trusts and different types of beneficiaries. All of this will be explained to you when you contact a trust attorney for advice.

What is a Trust and Who Can Benefit from One?

A trust is a legal arrangement that allows the trust creator to transfer assets to another person who is the trustee. The trustee holds, manages, and administers the assets of the designated beneficiaries. A trust document called a trust deed, specifies the trust terms and conditions for its administration and trust distributions.

Trust beneficiaries are usually children or grandchildren, but they can also be organizations like charities and schools. However, some states restrict the types of beneficiaries allowed. For example, you may not be able to name your dogs as beneficiaries. Consult your Orange County estate planning attorney to ensure that your trust is legally compliant. 

People as Beneficiaries: Understanding the Different Types of Beneficiaries

There are three types of beneficiaries, these are:

  1. Primary: These beneficiaries are your first choice. They're usually family members and loved ones.
  2. Contingent: These are secondary beneficiaries. They're the ones who inherit if the primary beneficiaries can't inherit (they're deceased) or won't inherit (a family feud).
  3. Residuary: These beneficiaries are your third choice. They're the ones who inherit when both primary and contingent beneficiaries can't inherit. They also inherit assets that aren't specifically named. For example, after the bulk of the estate has been distributed the remainder goes to the residuary beneficiaries.

Primary beneficiaries typically include:

Immediate family and close loved ones. For example, a mother, sister, daughter, best friend of 30 years, or exemplary nurse who went out of her way to help you while caught in tragic circumstances.

If you have a minor child when you pass away, their legal guardian manages their inheritance until they come of age.

Talk to your estate planning lawyer for professional advice about naming family and friends with special needs as beneficiaries. It's possible that your good intentions put them in a position where they no longer qualify for government assistance and could end up much worse off than before.

Charities as Beneficiaries: How Charitable Trusts Benefit Non-Profit Organizations

A philanthropic option available to you is a charitable trust. You create a trust whose purpose is to stream income to your preferred charity.

Types of Charitable Trusts

The two most common are charitable lead trusts and charitable remainder trusts.

Charitable Lead Trust

A charitable lead trust is an irrevocable trust that streams trust income to your nominated charity for a period, for example, seven years. At the end of the period, the remaining assets are distributed to beneficiaries and not the charity.

Charitable Remainder Trust

A charitable remainder trust is an irrevocable trust that streams income to the chosen charity for a period of time. When that period ends, the remaining assets go to the charity and not the beneficiaries.

There are two types of charitable remainder trusts. Charitable remainder annuity trusts (CRATs) donate a fixed amount as an annuity annually and don't allow additional contributions. Charitable remainder unitrusts (CRUTs) donate a fixed percentage of the value of the trust annually and do allow additional contributions.

Places of Worship as Beneficiaries: Using Trusts to Support Your Religious Community

Many people want to contribute to their place of worship upon their death. It's one last tithe. A tithe is a cash donation to a church that amounts to 10% of property or income. It can also be 10% of your estate.

An estate planning attorney will help you find the best way to carry out your final religious duty by looking at the different types of trusts and determining which option is best for you. For example, you could set up a trust that donates 10% of the value of the trust to the church annually.

Animal Shelters as Beneficiaries: Providing for the Care of Your Furry Friends

You can contribute to your favorite animal shelter or rescue center in a revocable living or charitable remainder trust. You can choose to leave a specified amount of money or resource, for example, all your books for the secondhand bookstore.

You can also go with a residuary option where you leave whatever is left of your estate after everything has been paid and all your beneficiaries are satisfied, to your chosen shelter.

There's also a contingent option should your primary beneficiary not be able to inherit. For example, you leave the remainder of your estate to your brother, but specify that if he doesn't survive you, then 100% of the remainder will to the animal shelter.

Alma Maters as Beneficiaries: Supporting Your Educational Legacy

A charitable remainder trust fund is also the best way to leave a portion of your estate to your school when you die. You can choose between the two types of charitable remainder trusts, charitable remainder annuity trusts or charitable remainder unitrusts.

For example, you might want a trust that allows you or others to keep making contributions, in which case you need a unitrust.

Businesses as Beneficiaries: Leaving a Legacy for Your Company

You may want to contribute to the continuation of your business after you die. As much as you love your family, you know none of them has a head for business, so you want to keep your legacy apart from the rest of your estate planning.

However, business legacies have the potential to be complicated. If you want to be as clear as possible about how you want to leave your legacy, you need to engage an estate planning lawyer who specializes in trusts. They'll help you create a trust specifically for your business's benefit.

Ready to Set Up a Trust and Benefit Those You Care About? Let Parker Law Offices Help You Make the Right Decision!

Don't leave your estate planning to chance by hiring inexperienced trust lawyers. Choose a firm with experienced trust and probate attorneys in Orange County. Parker Law Offices specializes in all aspects of estate planning, with a special focus on the different types of trusts.

Whatever the size of your estate, let our attorneys help you reach your estate planning objectives. Complete the contact form on our website and we'll get back to you. You may also contact us at 949-867-4818 at Parker Law Offices to book a consultation today!

Maria Parker assists her clients plan for their end of life health care wishes and the ultimate distribution of their wealth after death. She personally experienced the importance of planning at the time her father passed away.

Contact Us

If you have any questions and would like to make an appointment for a consultation, fill out the form and we will get in touch with you shortly.
Estate Planning Attorney in Orange County, CA
Wills & Trusts, Estate & Trust Administration, Probate, and Health Care Power of Attorney
© 2024 Estate And Trust Lawyer. All Rights Reserved.