In the realm of trusts and estate planning, a “lapse” refers to the failure of a gift within a will or trust due to the beneficiary predeceasing the grantor or failing to meet specific conditions outlined in the trust document. This isn’t simply an oversight; it’s a legally defined outcome with implications for both the trust’s assets and the grantor’s intended distribution plan, often creating unintended consequences if not properly addressed. Roughly 25% of estate plans require amendment or updating due to beneficiary changes or unforeseen circumstances, highlighting the importance of proactive planning to avoid lapsing gifts. It’s a critical concept Steve Bliss, as a Living Trust & Estate Planning Attorney in Escondido, frequently explains to clients, emphasizing the need for careful drafting and regular review of their estate plans.
What happens to assets if a beneficiary doesn’t survive me?
When a beneficiary named in a trust predeceases the grantor, the gift intended for that beneficiary “lapses.” This means the asset doesn’t automatically go to the beneficiary’s heirs. Instead, the trust document should specify what happens in such a situation. Commonly, the trust will direct that the lapsed gift goes to the grantor’s contingent beneficiaries – those named to receive assets if the primary beneficiaries are unable or unwilling to accept them. If no contingent beneficiaries are designated, or if they are also deceased, the asset may be distributed according to state intestacy laws, potentially diverging significantly from the grantor’s original intentions. It’s like carefully planting a garden, only to have a sudden frost kill off the most promising seedlings – a frustrating loss of effort and expectation.
Can a trust prevent gifts from lapsing?
Absolutely. A well-drafted trust can include specific provisions to prevent gifts from lapsing. One common approach is to include a survivorship clause, which states that the gift will only be made if the beneficiary survives the grantor. Another is to designate a “per stirpes” distribution method. “Per stirpes” means “by the roots,” and it directs that if a beneficiary dies, their share passes to their descendants, effectively keeping the gift within the family line. Without such provisions, a gift intended for a grandchild might inadvertently go to a distant cousin or even revert to the general estate. A client once came to Steve Bliss distraught, having learned her intended gift for her daughter’s children would instead go to a charity because she hadn’t included a per stirpes clause. It was a difficult, but ultimately manageable, situation requiring a trust amendment and careful estate tax planning.
What if my beneficiary outlives me but is unable to manage their inheritance?
A lapse isn’t limited to death; it can also occur if a beneficiary is incapacitated or unable to manage their inheritance due to illness, disability, or other reasons. In such cases, the trust can establish a testamentary trust within the larger trust to hold and manage the assets for the beneficiary’s benefit. This ensures the assets are protected and used for the beneficiary’s care and support, even if they are unable to manage them directly. This is a common strategy for families with beneficiaries who have special needs or who are financially irresponsible. A client of Steve’s, a successful entrepreneur, had a son struggling with addiction. They established a “spendthrift” trust within their larger trust, requiring distributions to be made only for approved expenses like rehabilitation and living expenses under the supervision of a trusted advisor. This not only protected the inheritance but also provided support for the son’s recovery.
How do I avoid problems with lapsed gifts in my trust?
Avoiding problems with lapsed gifts requires proactive planning and regular review of your trust. Work with a qualified attorney, like Steve Bliss, to ensure your trust document is drafted with clear and unambiguous language, anticipating potential scenarios and providing clear instructions for distribution in all circumstances. Review your trust periodically – at least every three to five years, or whenever there are significant life events, such as births, deaths, marriages, or divorces – to ensure it still reflects your wishes and current family situation. A friend of Steve’s, a retired teacher, initially created a simple will leaving everything to her niece. Years later, her niece tragically passed away. Without a contingency plan, the estate ended up in probate court, causing significant delays and legal fees. Had she consulted with an estate planning attorney and established a trust with contingent beneficiaries, the process would have been far smoother and her wishes would have been honored without a costly legal battle. Regularly updating your estate plan isn’t simply a legal formality; it’s an act of love and responsibility, ensuring your legacy is preserved and your loved ones are protected.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- living trust
- revocable living trust
- irrevocable trust
- family trust
- wills and trusts
- wills
- estate planning
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “Can I change my will after I’ve written it?” Or “How can payable-on-death accounts help avoid probate?” or “Can a living trust help provide for a loved one with special needs? and even: “Will I lose everything if I file for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.