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Choosing backup beneficiaries for Texas trusts

Ordinarily, when a trust is created, the person creating the trust is doing with a primary beneficiary already in mind. Many people fail to consider who will be the beneficiary of the trust if the primary is incapacitated or deceased. Who becomes the backup beneficiary, or contingent beneficiary, may be just as important as the primary beneficiary for most Texas trusts.

Without a contingent beneficiary, the trust assets could end up back in the estate that has to be probated upon the death of the maker of the trust. This could effectively destroy whatever estate plan was in place. For example, a plan that provided for little to no estate tax could end up owing significant taxes without a beneficiary for a trust.

Deciding who will be the contingent beneficiary can sometimes be more difficult than choosing the primary beneficiary. For instance, making a minor child the backup beneficiary can be problematic if the primary beneficiary is not available. A quick fix for this situation is to make a guardian for the minor child the contingent beneficiary in order to make sure the assets are taken care of on behalf of the child. However, it may become necessary in the future to amend this arrangement once the minor child reaches the age of majority.

Some in Texas may attempt to skip the step of choosing a contingent beneficiary for trusts. However, doing so can cause far more problems later than it will to take the time up front. Making sure there is a backup plan can help ensure that a well thought out and executed estate plan remains intact upon death.

Source: lifehealthpro.com, "Why contingent beneficiaries shouldn't be an afterthought," Tom Nawrocki, Aug. 1, 2013

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