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This is an estate planning question. I want to accomplish certain longer-term control over distribution of assets and I'm wondering if there is a standard mechanism for doing it.

Situation

Say I have a number of relatives -- Sally, Mary, and Joe -- all of whom are "retirement age" and not in good financial shape. They are my beneficiaries, and all could use as much financial help as possible. I could simply divide my estate among them, but various situations would make that less than ideal in terms of providing the most possible benefit. For example:

  • If Sally dies soon after receiving her inheritance, her will leaves everything to cat charities. So most of my assets bequeathed to her would end up not being used to help needy relatives.
  • If Mary dies soon after receiving her inheritance, her estate would go to her ne'er-do-well husband, who I don't like, rather than helping my other surviving relatives.

These and other situations could result in a one-time distribution of my estate not providing all of the benefits it could to the people I want to help. I'm looking for a better way to control the distribution, and adjust it later if and when conditions change. This can't really be done by asking my beneficiaries to provide for my objectives in their own wills.

Objective

It seems like a potential solution would be to provide the distribution as annual stipends divided among the still-living beneficiaries. Each year, the beneficiaries who are still alive would receive a payout. The share of the estate that would otherwise have gone to relatives no longer in a position to benefit would become a bigger pot for the remaining ones who can.

This would obviously require someone, or a financial organization, acting in a potentially long-term fiduciary role, and the rules and mechanisms spelled out. But I can't imagine that I'm the first person with a similar objective, so I assume this isn't something that would need to be invented from scratch.

Questions

  • Is there an existing standard mechanism to accomplish this?
  • Would it require setting up a trust?
  • 2
    First of all, I'm thinking that a trust is really what you want. But if you don't want a trust, there are options, such as annuities that pay heirs. – user11599 Dec 15 '16 at 6:47
  • @user11599, thanks for the response and link. It looks like there are some tools available to do this, but I see there's a lot of non-obvious complexity. – fixer1234 Dec 15 '16 at 7:29
  • It also looks like there are some cost trade-offs. I have no idea how expensive this would be (it's certainly not a canned will off the Internet). The costs of setting this up, maintaining it, administering it, etc., could eat up part of the estate this would be intended to salvage. And it's trading guaranteed costs against potential situations that might not even happen. Thinking about this stuff can make your brain hurt. – fixer1234 Dec 15 '16 at 7:47
  • Is the size of your estate large enough that it will have to pay estate taxes? – mhoran_psprep Dec 23 '16 at 11:43
  • @mhoran_psprep, I wish. No, it's big enough that I'm thinking about the control issue in the question, but not in a league where there would be estate taxes. – fixer1234 Dec 23 '16 at 17:00
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It seems like a potential solution would be to provide the distribution as annual stipends divided among the still-living beneficiaries. Each year, the beneficiaries who are still alive would receive a payout. The share of the estate that would otherwise have gone to relatives no longer in a position to benefit would become a bigger pot for the remaining ones who can.

This would definitely require some kind of trust being set-up. There is no easy way.

  • Thanks for responding. Can you elaborate on that? Why would a trust be required? Is there no other mechanism (an annuity, for example)? Is there any reference material you can point me to for further information on your conclusion? – fixer1234 Dec 23 '16 at 5:57
  • @fixer1234 You can buy an Immediate annuity [being both owner and annuitant] by paying lumsum payment. You would start getting payments till you survive. The names beneficiaries after your death. This does not solve your issue. Alternatively you can buy 3 Immediate annuity [being only the owner on these 3] and name 3 others as Annuitant on their individual policies. They will start getting the payments immediately/fixed date. On their death, the other 2 can be beneficiaries. However as much as I know their is no either / survivor beneficiary set-up possible. – Dheer Dec 23 '16 at 7:07
  • I appreciate you input, but to be honest, I was kind of hoping that an answer would be more definitive and authoritative, and include some explanation. – fixer1234 Dec 23 '16 at 7:28
  • @fixer1234 Apologies. Will delete this in some time. – Dheer Dec 23 '16 at 8:08

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