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Regularly Update Your Estate Plan to Fill Gaps

Dear Mr. Premack: I have a living trust and a Will with two co-executors, who are also co-trustees of the trust. Upon my death, the Will leaves all my funds to the trust. The interest money from the trust will be given to my 50-year-old son. If both my trustees pass away, what happens to the trust money? Who will distribute it to my son? If my son also dies, what happens to the trust money? – ASH

You asked the right questions and you must provide the answers yourself. I’ll give you a few clues. Your living trust should have already been structured to carry out your personal goals for the funds. For instance, you already decided who would take the role of co-executors and of co-trustees. You already decided that the interest money would be paid to your son, and had your lawyer write those instructions into the trust agreement.

Now you recognize that you’ve left some gaps in the trust. What if both co-trustees die? Since you are raising that very valid issue while you are still alive and functional, you should add an amendment to the trust so that the answer you provide becomes legally binding. Go back to the lawyer who helped you write the trust.

The amendment can simply lay out the new contingency plan, for instance: “If A and B both die, then C will become Trustee (and if C dies, then D will become trustee)”. Direct action by you to provide that type of contingency plan is by far the fastest, least expensive way to fill this particular gap in the trust.

If you had not realized that gap exists before you died, and if both co-trustees died thereafter, then the Texas Trust Code allows “any interested person” to petition the court for appointment of a replacement trustee. Certainly your son, as beneficiary, is an interested person so he could ask to become trustee or ask that someone of his choice become trustee. You may not desire that outcome, consequently you should act to provide the answer yourself via an amendment to the trust.

You also ask what would happen if your son should die (after you have died). This is another gap your lawyer should have recognized and you must fill. What do you want to happen if your son dies and cannot continue as beneficiary? Does he have siblings or children? You get to choose what happens to the funds if he dies, and can do so in the same amendment that addresses the death of the co-trustees.

What if you fail to fill that gap? The law is vague on this point. The remaining trust assets might pass to your son’s heirs-at-law or may revert back to your estate, to pass to the heirs identified in your Will. (Even when one has a living trust, it should be backed up with a legally proper Will.) Again, the best thing for you to do is to decide now for yourself what outcome you desire, and then ask your lawyer to prepare an amendment to the trust containing your instructions.

Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2013) practicing estate planning and probate law in San Antonio.

Original Publication: San Antonio Express News, March 5, 2010


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