What Happens to a Trust When No One Is Named As a Beneficiary?

By Maggie Lourdes

Trusts are popular estate planning tools because they allow heirs to avoid probate court proceedings. A trust is created by a party called a settlor who transfers to a trustee legal title to any assets he places in the trust. Generally, trusts must name ascertainable beneficiaries in order to be valid. Some exceptions exist to the ascertainable beneficiary requirement.

Resulting Trusts

If a trust fails because it lacks an ascertainable beneficiary, a resulting trust follows. A resulting trust is a tool used by courts to return a failed trust's assets to the settlor. For example, Bob is the settlor of ABC trust. He names his close friends as the trust's beneficiaries after his death. The trust fails because the trustee cannot conclusively identify Bob's close friends without their names. The court can create a resulting trust that removes trust assets from the trustee's control and returns it to the trust's settlor. In Bob's case, his probate estate would receive the assets since the resulting trust followed his death.

Testate and Intestate Succession

When a resulting trust transfers property to a settlor's probate estate, it is generally distributed according to her will. However, most settlors only draft pour over wills that simply devise all assets back to their trusts. If no will exists, or only a pour over will is left, reacquired property is distributed by intestate succession statutes. Intestate heirs are determined based on the closeness of their relationship to the decedent. Spouses and children take priority. Thereafter, property goes to surviving parents, siblings, aunts, uncles and so on.

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Pet Care Trusts

Legally, animals are considered property under the law. Historically, they could not be named as trust beneficiaries. In recent years, states have begun recognizing pet care trusts as an an exception to the ascertainable beneficiary requirement. Generally, settlors may now create trusts to care for their pets after death. A trustee who neglects to provide care for a designated pet may be challenged in court by a person who has a genuine interest in the animal's welfare.

Intended Purposes

A trust may also be valid if it lacks an ascertainable beneficiary but states a specific purpose. For example, a person may wish to ensure care and maintenance of his grave site or those of his loved ones. So long as a trust states a clear purpose, a person does not need to be named as a beneficiary. Sam may create a trust directing the trustee to arrange that weekly flowers be placed at his cemetery plot. No person is named as a beneficiary in the trust, but a clear goal is given.

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Can a Living Trust Be Disputed?

References

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