Contingent Beneficiary Under Florida Estate Law

A contingent beneficiary, sometimes called a remainder beneficiary, holds an interest in a trust that vests only after the primary beneficiary’s interest lapses. For example, you might establish a trust that authorizes distributions to your spouse until he or she dies, and the trust instrument might specify that the remainder of its property be divided among your children provided that they outlive your spouse. Contingent beneficiary scenarios involve special considerations.

It is a good idea to name contingent beneficiaries any time you create a will or trust, because things change — your property could end up being distributed in a way you didn’t intend if one of your beneficiaries suffers an untimely death, for example. Even if you are careful to update these instruments, without contingent beneficiaries something could happen after you die that might frustrate your intentions.

An Example of How Things Can Go Wrong With Contingent Beneficiaries

The case of Sibley v. Estate of Sibleyillustrates, among other things, what can go wrong when you appoint an organization rather than an individual as a primary beneficiary, and another party (an organization of individual) as your contingent beneficiary. An individual is considered legally dead when a death certificate is issued. But when, exactly, does an organization “die”?

In Sibley, the trustee was instructed to distribute assets to a certain charitable foundation. If the foundation was “no longer in existence”  at the time the distribution was to be made, the trustor (the person who established the trust) selected a contingent beneficiary, another foundation, to receive the assets.

What Went Wrong

The problem arose when it became known that the original beneficiary foundation had failed, six months before the trustor’s death, to file a required annual report with the Florida Secretary of State. The consequence of this was that the foundation was allowed to operate only for the purposes of winding up and liquidation.

Does such a scenario count as “no longer in existence”? The opposing argument was that even in this case it was possible to seek reinstatement of the foundation, which in fact occurred several months after the trustor died. Ultimately, the court ruled that the primary beneficiary was indeed “no longer in existence” at the time the distribution was required to be made, and thus the assets went to the continent beneficiary. But this case could have gone either way.

And the Moral of the Story is…

Estate law is complex, and estate planning documents need to be drafted with the utmost care. In the foregoing case, the term “no longer in existence” was unacceptably vague, and the court ended up having to guess what the trustor would have wanted had he still been alive. A skilled Florida estate lawyer can help you head off problems like these before they arise.

Contact Lorenzo Law Today

If you are considering creating an estate plan, especially one involving contingent beneficiaries,or if you are already involved in a dispute, contact Lorenzo Law ASAP for a free. confidential case consultation. Although we maintain offices in Coral Gables and Ft. Lauderdale, we serve clients from all over Florida. Call us at (305) 999-5411, fill out our online intake form, email us at [email protected], or visit one of our offices.