Friday, March 7, 2008

Zoom Zoom Zoom, Part 2. Which son is the heir?

Our Client is a young woman who inherited a sizeable estate when her first husband died tragically in a plane crash. She has since remarried. She has two minor children from her first marriage. Her current husband has a son from a previous marriage. She and her current husband are considering having another child.

The Trusts says in the Distribution Provisions the Estate will be divided as follows:

The client’s husband and two sons will each receive a 1/3 share of her estate. If her husband dies before she does or for some other reason can’t claim his share, that share will be divided equally between the two boys. If one of the boys can’t claim his share, his entire share goes to his surviving brother.

The Trust goes on to direct that two subtrusts be created, one for each of the sons. These subtrusts will each receive a 1/3 share of the estate. The Trust says that when the conditions and requirements for the Subtrusts are satisfied, the beneficiaries will receive full and outright distribution of remaining assets.

And here’s the real contradiction in this clause,

“If any beneficiary set forth in part (a) above (meaning the two boys) shall predecease the termination of his or her subtrust . . .
Such subtrust shall be terminated forthwith and the principal and accumulated income distributed to the surviving heirs of the deceased beneficiary.”


Here we have a case where the distribution provisions say that if one son dies, his share goes to his brother. Under the subtrust division, if one son dies, his share goes to his surviving heirs. His brother could be that surviving heir and there would be no conflict, but in a few years, he may have a son of his own. So who would inherits? Our client’s surviving son or her deceased son’s son?

Even worse, what if the current husband dies. Who gets his share? Will it be split between our client’s two sons as directed in the distribution provisions or will it go the husband’s legal heirs as directed in the Termination of Subtrust provision? That provision directs it to go to his heirs, which is likely to be his son from his first marriage.

Probably not what our client had in mind.

More on Monday . . .

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