This column first appeared in the Express-News on March 3, 2016.
Dear Mr. Premack: I am preparing my thoughts for making a Will. I am unmarried and have decided to leave my estate to my two brothers when I die, in equal shares. But I have a question: if one of my brothers dies, can he will his share to someone else? I can’t decide if I would like the answer to be yes or if I’d prefer no. How can I retain the most control? – DH
The best way to control the disposition of your assets is to declare your instructions in a legally binding manner. You can do so in a Will (the traditional method), in a Trust, or with specific account beneficiary designations.
All estate plans should have contingency plans. If your “Plan A” is to leave all your assets in equal shares to your two brothers, you also need a “Plan B” to account for changes in circumstances. You ask if you can allow your brothers to declare their own “Plan B’s” in case one of them dies before you.
The answer is yes, but it must be done very carefully. For instance, your Will or Trust could grant to each brother a “power to appoint” his interest in your estate. You can be broad or narrow in granting the power. Your plan could allow him to pass his share among his children, or you could allow him to select any group of people or charities.
He would have to exercise the power to appoint in a legally binding manner. Typically, he would be required to make reference to the power granted to him under your plan, and state the identity of those he selects to receive his share should he predecease you. The reference would be contained in his own Will or Trust.
You can retain some flexibility as well. For instance, you can grant him the power to appoint and additionally state that if he does not validly exercise his power then it is waived. If waived, you can declare exactly to whom his share should pass. This is a good option as it allows him to make the choice of his own “Plan B” but provides your own “Plan B” should he fail to take binding action.
Be aware that if you do not grant this power to appoint, then your brothers have no say in what happens to their shares. Instead, the individuals you name in your “Plan B” will inherit if a brother predeceases you. Frankly, you would be in the majority if you decide declare your own “Plan B”. Most people want to make up their own minds about who will receive their assets when they die.
For instance, if your Will or Trust says “If my brother Bob predeceases me, his share of my estate will instead pass to his children Sue and Tom” then that will be the outcome. (You may also want a “Plan C” to say what would happen should Sue and/or Tom also predecease you.)
Timing makes a big difference. If a brother dies before you, then the instructions in your Will or Trust control that share. But if he outlives you, your Will gives him his share. If he happens to die after inheriting, his Will or Trust determines the next step. He already inherited from you; the assets became his property, so he gets to decide who receives them should he later die.
What if you have a bank account and tell the bank to designate your two brothers as “pay on death” beneficiaries? If they both outlive you, they each receive half of the account balance. But the bank may not give you the option of declaring a “Plan B”; they may impose their own rule that if one beneficiary dies then the entire account goes to the surviving beneficiary. Only your Will or Trust gives you complete flexibility in writing your own plans, and only your Will or Trust give you the option of granting a power to appoint to your brothers (if you decide you favor that approach).
You should visit with a qualified Certified Elder Law Attorney. The choices you make must be properly and legally documented in order for them to be enforceable.
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.