Imagine this: you're driving along the I-5 corridor with your family, thinking about the future. Like many parents, you've established a testamentary trust to protect your assets and ensure your children's well-being after you're gone. Now, what happens if tragedy strikes, and your child predeceases you? Without specific provisions in place, that child’s share of your estate may pass to an unintended heir—someone you never intended to benefit from your life’s work.
This issue is far more common than many realize, and it’s a problem that can catch even the most diligent planners off guard. Take, for example, the tragic case of a family who created a trust for their children, assuming that everything would be in order. When their oldest son passed away unexpectedly, they were shocked to learn that, under the state’s intestate laws, a distant relative—someone the parents barely knew—stood to inherit part of their estate. This outcome can be deeply troubling for parents who had carefully crafted their estate plans with their children in mind, only to see their assets go to a remote contingent beneficiary after an unexpected death.
Key Points
Some relevant points from the search results:
- Grandchildren generally do not have automatic inheritance rights, except in certain circumstances like when a grandparent dies without a will and the grandchild's parent is deceased.
- Contingent remainder beneficiaries of a trust may have an "indefeasible interest" even if they don't have immediate rights to the assets.
- Presumptive heirs generally don't have standing to contest a living person's will or trust, as they only have an "expectancy" rather than a vested interest.
- There are several famous will contests mentioned involving celebrities and wealthy individuals, but none specifically about remote contingent heirs inheriting large amounts.
- Beneficiaries may have standing to sue a trustee for breach of fiduciary duty after the settlor's death, even for actions taken while the trust was revocable.
The root of this problem lies in the difference between heirs and beneficiaries, the complexities of intestate laws, and the law's disdain for uncertain or "dangling" interests. Without careful planning, an unintended heir could inherit a significant portion of an estate, undermining the trustmaker’s intentions. To avoid this, it's essential to understand how beneficiaries are designated, how intestate statutes work, and why certain legal doctrines like the Rule Against Perpetuities (RAP) and escheatment statutes exist to prevent such complications.
"And the Estate Goes to..."
In estate planning, the terms "heir" and "beneficiary" are often used interchangeably, but they are not the same. A beneficiary is a person named in a will or trust to receive assets, while an heir is someone who is legally entitled to inherit from an estate if there is no valid will or trust in place. The difference becomes critical when a trustmaker fails to update their plan or does not clearly define what happens if a beneficiary predeceases them.
Under intestate statutes, if someone dies without a valid will or trust, the estate is distributed according to a pre-determined formula, typically passing to immediate family members like children or spouses. But in the case of a predeceased child, this is where things can get tricky. If a testamentary trust doesn't account for remote contingent beneficiaries—someone who would step in if the primary beneficiary passes away—state intestacy rules may kick in, leading to unintended outcomes.
Consider the case of Greenville v. Thompson (a hypothetical), where a parent’s child tragically died in an accident. The parent had created a will, but it didn’t specify what should happen if their child predeceased them. As a result, the state’s intestate laws were applied, and a distant cousin was entitled to a significant portion of the estate. The cousin, who had no prior relationship with the parent, was understandably shocked by the windfall, while the parent’s intended wishes were left unfulfilled.
remote contingent heirs occupy a unique and often overlooked position. They are, in essence, the "last resort" beneficiaries—those who step in only if all other primary and contingent beneficiaries are unable to inherit. Unlike the primary or even secondary beneficiaries, remote contingent heirs are placed at the very end of the line, waiting for a series of unlikely events to unfold before they might inherit anything.
The Last in Line
Think of remote contingent heirs as the ultimate safety net. The estate planner or testator typically hopes these heirs never need to be called upon, but they are included in the event that everyone else—both primary and secondary beneficiaries—are no longer available. Whether it’s due to death, incapacity, or other disqualifications, remote contingent heirs are there to ensure that the estate doesn't fall into intestacy, where the state's laws decide who inherits by default. This could mean distant cousins, charitable organizations, or other broadly defined categories like "my surviving relatives" step in to inherit the estate.
Unlikely Inheritance
For most remote contingent heirs, the chances of actually receiving an inheritance are slim. It would take the predeceasing or disqualification of all other named beneficiaries for the estate to pass to these distant heirs. It's a bit like being an understudy in a play where the main actors rarely leave the stage—you're ready to step in, but the opportunity may never arise. Still, estate planners include these clauses as a precaution, ensuring that assets don’t end up in limbo.
Broad Definitions and Final Backups
While primary and secondary beneficiaries are often carefully chosen and specifically named, remote contingent heirs are usually more broadly defined. It might be a distant relative or an institution like a charity. This vague definition serves a functional purpose. Remote contingent beneficiaries are there to catch any loose ends, to prevent the estate from falling into the hands of the state if every other possibility has been exhausted.
Legal Rights and the Uninvolved Heir
Legally, remote contingent heirs generally have fewer rights than their primary counterparts. Primary beneficiaries often have rights to information about the estate or trust and may be actively involved in its administration. Remote contingent heirs, on the other hand, may not even know they are potential inheritors unless the unlikely scenario arises. They are not typically entitled to updates or disclosures about the estate until the moment their involvement becomes necessary, and in many cases, that moment never comes.
The Origins of the Remote Contingent Rule
The default to intestacy statues is rational when you understand the Law's disdain for uncertainty, especially when it comes to property interests that linger without a clear resolution. This is why we have laws like the Rule Against Perpetuities (RAP) and escheatment statutes. The former demands termination of a trust within a certain time period. The latter lays out what might happen if these principles, through a lack of proper planning, are violated.
The Rule Against Perpetuities is a centuries-old legal principle that aims to prevent "dangling" interests—situations where the transfer of property remains uncertain for too long. Under RAP, any interest in property must vest, if at all, within 21 years after the death of a relevant person alive at the time the interest was created. This rule exists to prevent the indefinite control of property by deceased individuals, ensuring that estates are distributed and used within a reasonable time.
The rule is notoriously complex and difficult to apply, leading to criticism and reform in many jurisdictions
Similarly, escheatment statutes prevent property from becoming ownerless. If no valid heir or beneficiary can be found, the estate "escheats" to the state, meaning the government takes control of the assets. This harsh result can often be avoided with proper planning, but it underscores the importance of clarity in estate documents.
The problem of remote contingent beneficiaries highlights why these laws exist. Without clear, explicit instructions in a will or trust, assets can end up in the hands of distant relatives or the state itself—neither of which are likely what the trustmaker intended.
The Fallout
Legally, remote contingent heirs generally have fewer rights than their primary counterparts. Primary beneficiaries often have rights to information about the estate or trust and may be actively involved in its administration. Remote contingent heirs, on the other hand, may not even know they are potential inheritors unless the unlikely scenario arises. They are not typically entitled to updates or disclosures about the estate until the moment their involvement becomes necessary, and in many cases, that moment never comes.
Often, if not in the majority of cases, those who begin the estate planning process only consider the second generation. In the absence of a legal plan that is specific, the third generation is less important than
To have standing, a plaintiff must possess a legally protected interest, whether that interest is provided by statute or arises from contract, tort, or property ownership. This principle is supported by the case of State Center, LLC v. Lexington Charles Partnership, 438 Md. 451, 500-02 (2014). In this instance, the appellant sought to bring a pre-mortem challenge against her mother's wills and revocable trust agreements. However, as a presumptive heir, the appellant had no property interest in her mother's assets. Under the law, it is “only after the death of the ancestor that [the children] are entitled to the status of very heirs, which will enable them to assert a right to property derived through [the ancestor] by inheritance.” Sellman v. Sellman, 63 Md. 520, 525 (1885). Therefore, the appellant lacked standing to contest her mother's wills and revocable trust agreements, as she had no property interest in her mother's trust assets or potential probate estate before her mother's death.
Two Possible Solutions
Thankfully, there are legal tools that can help avoid the chaos of intestacy and unintended heirs. The use of per stirpes and per capita distributions can significantly clarify who should inherit if a primary beneficiary predeceases the trustmaker.
- Per stirpes (Latin for "by the branch") ensures that if a beneficiary dies, their share is divided equally among their descendants. For example, if a trustmaker’s child predeceases them, the child’s portion of the estate would go to their children (i.e., the trustmaker’s grandchildren), preserving the line of inheritance.
- Per capita (Latin for "by the head") distributes the estate equally among all living beneficiaries. If a child predeceases the trustmaker, their share would be redistributed among the remaining beneficiaries rather than passed on to the deceased child’s descendants.
These two little Latin phrases—per stirpes and per capita—can drastically reduce the potential for confusion or unintended consequences. They provide a clear structure for what happens when a beneficiary is no longer around to receive their inheritance, preventing remote heirs from stepping in.
Another effective tool is the creation of an underage beneficiary trust provision. This provision holds the assets of a minor beneficiary in trust until they reach a certain age—say, 25, or even in staggered distributions at ages 25, 30, and 35. This structure not only ensures that young beneficiaries don’t receive a windfall before they are mature enough to handle it but also sidesteps the default rules of UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act), which typically require distributions at age 18 or 21. By setting your own distribution schedule, you maintain control over how and when your beneficiaries receive their inheritance.
Conclusion
The problem of remote contingent beneficiaries is a common issue in estate planning, but it’s one that can be effectively managed with the right tools. By understanding the difference between heirs and beneficiaries, accounting for intestate statutes, and utilizing distribution strategies like per stirpes or per capita, trustmakers can ensure that their estate goes exactly where they want it to—without the risk of unintended heirs or lingering interests. Simple provisions like an underage beneficiary trust can add an extra layer of security, ensuring that your assets are managed wisely and distributed when your beneficiaries are ready. The law may be slow to adapt, but your estate plan doesn’t have to be. With thoughtful planning, you can avoid the pitfalls of intestacy and create a legacy that endures exactly as you intended.
