When dealing with living trusts, the focus is often on what happens when the settlor passes away. But what if one of the beneficiaries of the living trust that you have set up dies? Do you need to amend the trust? Well, as you might expect, it depends.
If the trust was drafted with all of the proper contingencies, nothing may need to be done if a trust beneficiary dies. For example, if you have named a beneficiary to receive a specific bequest (a gift of a specific amount of money or a specific item) and that beneficiary dies, you may have simply allowed the bequest to lapse. In such a case, the bequest would simply pass to the residuary beneficiaries. Or, you may have stated in the bequest that if the beneficiary dies, the bequest passes to his or her children. In either situation, nothing may need to be done.
However, I have seen situations in which there is no alternate distribution provided in the event of a beneficiary’s death. This often is the case in “do-it-yourself” living trusts. The person using the DIY trust kit simply lists the person’s name as the beneficiary and does not think about providing for an alternate distribution plan in the event of the named beneficiary’s death. This can often end up in probate court to resolve the issue.
If your living trust fails to provide for an alternate distribution plan, whether you created the trust yourself or you had an attorney draft it, and that beneficiary dies, you will need to amend the trust to provide for new beneficiaries. You may want to review your trust as soon as you can to ensure that such contingent distribution plans are provided for, especially if you drafted the trust yourself from a do-it-yourself living trust kit.