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What is a Contingent Beneficiary and Why Is That Important to Me?

In short, a Contingent Beneficiary is a person who will receive a benefit under a Will or Trust subject to a condition or event occurring.

I am in the process of assisting another San Diego family prepare their Estate Plan. A husband and wife team happily married for 25+ years with two children are planning what to do with their North Park home in the event of their deaths. In this case they want the house to transfer to their two adult children in the event of their death. But, what happens in the not-so-random case where mom, dad, son and daughter are all on a family trip when a tragedy occurs and all of them die? This is where a Remote Contingent Beneficiary or Contingent Beneficiary steps in. The person, persons, group or charity identified as a Contingent Beneficiary (or in this case a Remote Contingent Beneficiary) in the Will or Trust steps in to receive the house if the son and daughter cannot receive the house due to their deaths.  The purpose of identifying a Contingent Beneficiary in a legal document such as a Will or Trust is to leave a back-up plan. No one wants to consider such possible tragic scenario like a plane crashing with all family members within, or a boat capsizing with all family members on it. However, back-up plans including Remote Contingent Beneficiaries are important for that specific reason – we never know what will happen in our future.

Take a look at your Will or Revocable Living Trust. Does it identify a Remote Contingent Beneficiary? Do you know who you’re listing as a back-up beneficiary to take your assets (your house, cars and money) in the event your primary beneficiaries predecease you? You have worked very hard to pay off that house mortgage and car loan. Now take the next step and plan properly while you’re in good mental health and have the mental capacity to plan these things yourself.

Some families leave a friend or distant family member. Other families list their grandchildren or extended family. Others elect a charitable organization or favorite group. Consider your options and leave this in writing. If it’s not part of your Will or Trust, it won’t do anyone any good to simply think about your wishes.  This is a good time to also have your Trust reviewed by a professional if you chose to prepare a Will or Trust using a self-help method. An improperly prepared Will or Trust is not valid in the State of California and you don’t want to leave such document to chance.

 

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Celebrate Mother’s Day With the Kids (Sunday, May 8th) & Then Set Time Aside Time to Make Arrangements for the Children

As families prepare to celebrate Mom this Mother’s Day on Sunday, May 8th, children and significant others prepare to make this 1 day extra special for her. This day usually showers Mom with flowers, a dining experience, gifts and other memorable moments for the whole family to remember. The point of this day is for Mom’s to feel extra special, but Mom’s can also take this day as a reminder of things to arrange for their family’s future.

Regardless of whether you have been a Mom for 1 year or 21 years, you and your children will feel even more love between yourselves when you let them know that you have planned for their future with estate planning arrangements. Estate planning arrangements offer answers to the following questions:

  1. Who will care for the kids in Mom’s long term absence or death?
  2. Will the kids be left under the parental guidance of their natural father upon Mom’s death?
  3. Are there any savings accounts reserved for supporting the kids upon Mom’s hospitalization, incapacity or death?
  4. Are there any life insurance policies Mom set up?
  5. Who will handle the children’s financial, healthcare and educational future if Mom cannot do it?
  6. If Mom passes away, what items (including houses) do the children split and when?
  7. If Mom owns a business and suffers an accident, who carries on the business?

Estate planning answers many other questions that are dependent upon the family structure. This is even more important where there are circumstances involving adopted children, step children, blended families, disputes among family members and so on.

Therefore, enjoy Mother’s Day this coming Sunday. Hug your children like never before on this day and then focus on how you can show them your love even more through estate planning.  Calendar a reminder to yourself as a Mom to plan for your children’s future through Wills, Trusts, Financial Planning and other methods.

 

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Yours, mine & ours = Family. But who raises the kids if somethings happens to us?

The phrase “yours, mine and ours” usually refers to the bringing together of children from two different families and growing the family with additional children. Essentially the end result is a household with a number of kids from different relationships. Usual circumstances include those where each spouse has children from previous relationships or marriages and then the newly formed couple have more children.  With these types of family structures, there are usually 2, 3, 4 or even more adults considering themselves parents to a set of kids.

Here’s an example: Sarah (age 21) marries Sam (age 21). They have Sammy Jr. soon after marriage. Sarah remarries five years later to Dave who has a three year old (Davy Jr,) from a previous marriage, and Sam remarries five years later to Diana who go on to have their own kids. Dave and Sarah, now your next door neighbors, care for Sammy Jr. (now age 5), Davy Jr., and together they have their own child Savannah (age 1). In this example, if your neighbors Dave and Sarah jointly pass away in a car accident a year later, who cares for baby Sammy Jr. , baby Davy Jr., and baby Savannah? It’s not a riddle. It’s a common occurrence!

In this scenario, the answer depends on written agreements between Sarah, Dave, Sam and Diana. That is of course assuming there is some sort of agreement. If nothing is in writing, the State of California will default answers for you concerning the care of your children.  Now, let’s add a few variables to this potentially realistic hypothetical. What if Sam and Diana suffer severe marital problems? What if Dave’s parents are elderly with medical problems too strong to handle children in the household? What if all of them want financial and physical custody of the kids?

I think you’re getting the idea. Preparing guardian nominations through a Will or a Revocable Living Trust is important for Sarah, Dave, Sam and Diana. Everyone has to be on the same page to ensure the well-being of everyone’s kids. Through proper guardianship nominations as part of your estate planning, you could avoid these future uncertainties once you pass away.

Parents, more than anyone else should hold discussions about guardianship nomination and discuss document planning soon after having their children. However,  other persons may also be interested in having the parents leave their desired plans in writing. Parents’ siblings, the parents’ parents (the two sets of grandparents), the parents’ friends and sometimes even the parents’ neighbors should all have this conversation with the parents to make sure there is proper planning set.

As a reminder, in estate planning, nominations for guardianship are set. However, those nominated may or may not wind up being the best fit for the children. Without any nominations, the California system will determine the welfare and future of the kids.

If you’re a soon-to-be parent of if you are already parents, start your planning now, not later. If you’re in a situation where your  household kids are comprised of “yours, mine & ours,” you are greatly encouraged to start these discussions. Here are a few factors that affect the family planning:

  • who the natural parents are
  • whether any children are adopted legally by the new step parent
  • step parent situations
  • parents with credit problems
  • parents with criminal histories
  • many more variables affect the nomination planning
  • physical custody and financial custody of the kids
  • parties that may be interested in caring for your kids