Do You Know the Beneficiaries of Your Dynasty Trust?

Many estate plans contain irrevocable dynasty trusts that are designed to benefit a spouse and several generations.  These trusts can span continue many decades, and it’s important to clarify who is a beneficiary at each generation.

Who Are Your Descendants?

The definition of “descendant” is straightforward:

A person who can be traced back to a particular ancestor through the same bloodlines. 

But the modern family now includes much more than just blood heirs, and here are some things to consider when defining a descendant in your trust:

Adopted beneficiaries

• Is a minor child who is legally adopted by your child, grandchild, or great-grandchild include?
• Is an adult who is legally adopted by your child, grandchild, or great-grandchild included?
• What happens if your child, grandchild or great-grandchild gives up their naturally born child for adoption, should your blood heir who has been adopted away from your family be included as your descendant?
• You need to clearly detail whether you want to specifically include or exclude adopted minor and adult beneficiaries in the definition of “descendant” in your trust agreement.

Stepchildren

• Should the definition of “descendant” include a stepchild of your child, grandchild, or great-grandchild who is never legally adopted by your heir but otherwise treated like one of their own?
• While you may have the opportunity to get to know your stepchildren and choose to include them or exclude them in the definition of your descendants, it will be important to decide and communicate whether stepchildren in later generations should be included or excluded as beneficiaries of your trust.

Carefully Defining Your Trust Beneficiaries Will Keep Your Heirs Out of Court

If you create a trust that is intended to last for multiple generations, then you need to consider who may be your “descendant” twenty, thirty, or even fifty years into the future.

Clearly defining the class of beneficiaries who will be entitled to receive distributions from your trust will allow for a smooth transition between generations and keep your heirs and trustees out of court.