Many estate plans establish trusts for children, grandchildren, or other beneficiaries. These are known as testamentary trusts, or trusts established at your death (as opposed to an inter vivos trust, or a trust established during your lifetime). However, assets that pass outside of the Will – like retirement accounts or life insurance proceeds – will not be directed to those trusts at death unless the client updates their beneficiary designations on those accounts or policies.
While many financial institutions are equipped to handle this, some will want to know specific data like: the name of the trust, the trust’s tax ID number, the trustee, etc. However, it is important to understand that these questions can’t always be answered. Because testamentary trusts won’t exist until after the client dies, there is no trust in existence now. Therefore, there is no trust name, tax ID number, or trustee. Some institutions then propose naming the estate as the beneficiary, but this can have significant negative consequences.
When our clients’ plans include testamentary trusts, we provide custom beneficiary designation attachments that properly direct death benefits to the trusts under your Will. At your request, we can also work with your financial institution to ensure that your beneficiary designations are properly implemented.
Contact us to find out how these beneficiary designations may benefit your estate plan.