Question About Bequest In A Will

[electrum]

Hi,

Here is the scenario.

Mr X is married with no children. The matrimonial home was bought by him b4 marriage and is held under his sole name.

If X predeceases his wife, aside from the usual monetary bequests, he would want her to have the full usage of the property (ie full ownership rights) for as long as she lives. But if he were to bequest her the property in his Will, it means that, on her passing the property would go to her family (presumably) instead of X's family

Would it be possible for Mr X to make a "time-limited" bequest I.e. that during Mrs X's lifetime she will have full ownership rights but on her passing, the property passes to Mr X's nominees?

Above is kind of a rare question but I think this type of issue appears in many families without children.

Hope to get some answers from the many experienced and learned people in this forum. I kind of suspect it's not possible but let's see. Thks

 

[limster]

one key question is whether you need to do this in secret, and it is important for your wife NOT to find out that you are making this arrangement, or whether you are ok for your wife to know.

 

[electrum]

If it's in the Will, Mrs X will know when it is read but I guess u mean is it OK for her to know now. I guess there may be a little cause for some friction but it actually will not affect Mrs X at all because she will have full ownership rights (right to stay or rent out - but maybe no right to sell) in her lifetime

 

[japst3r]

You can make your wife a "life tenant" and your nominee as the "remainderman". Google it and also seek legal advice for sure. Your wife will have full rights of use over the property but will not be able to sell it as the property must ultimately be passed to your nominee upon her demise.

 

[electrum]

You can make your wife a "life tenant" and your nominee as the "remainderman". Google it and also seek legal advice for sure. Your wife will have full rights of use over the property but will not be able to sell it as the property must ultimately be passed to your nominee upon her demise.

Thanks for the response. It's an interesting idea - I will do some read-up on it. The immediate thought I have is - who will hold title to the property? The Estate, the wife or the eventual owner?

And do u think the same concept might apply to other assets, say monies as well?

Let's say Mr X has a property and $2MM liquid assets. Mrs X also has $1MM liquid assets. Both Mr and Mrs X have siblings but no children

In the normal scenario, Mr X would divide up the 2MM amongst his wife and his siblings in his Will. But Mr X's first priority is to look after his wife and ensure she has enough funds the rest of her life. This is difficult to determine as Mr X does not know how long Mrs X will live after he's gone. If he leaves too little for Mrs X, it may be insufficient if complications like medical bills arise. Otoh, if he leaves the major portion of his $2MM to her and Mrs X passes on very shortly after Mr X, the monies will go to Mrs X's siblings via her Will

Instead of dividing up the $2MM, can we apply the same "life tenant" and "remainderman" concept?

I.e. the Will will say "I bequest all my liquid assets to Mrs X to use freely and unemcumbered as long as she lives and on her passing, such liquid assets as remains shall be given to the following persons in the following ratios..... etc etc"

Thanks again for your thoughts on this

 

[epigram]

Suggest you seek legal advice instead of relying on Google and forum answers.

 

[BBCWatcher]

In the normal scenario, Mr X would divide up the 2MM amongst his wife and his siblings in his Will.

Is that “normal”?

But Mr X's first priority is to look after his wife and ensure she has enough funds the rest of her life. This is difficult to determine as Mr X does not know how long Mrs X will live after he's gone. If he leaves too little for Mrs X, it may be insufficient if complications like medical bills arise. Otoh, if he leaves the major portion of his $2MM to her and Mrs X passes on very shortly after Mr X, the monies will go to Mrs X's siblings via her Will

It’s very easy, actually, thanks to life annuities. He can either purchase a life annuity now (probably a good idea since then he can choose) or in death. A life annuity would provide monthly income in this case to his surviving spouse for the rest of her life however long it lasts. That monthly income would support her dignified (or even better than that) lifestyle for the rest of her days. And as long as the payor is a high quality one she can’t screw it up. (A lump of cash she might.)

Another twist is something called a charitable remainder trust. Some charities are very happy to arrange them. The charitable reminder trust in this case pays $X/month (escalating ideally) to his surviving spouse then, when she passes on, splits any residual between siblings and the charity. For example.

Yet another option is he could do all that now (or almost all): buy a joint/survivor (or joint/contingent, or two separate) life annuity(ities) for himself and his spouse and give his siblings some money now. And perhaps enjoy it with them while everyone is still alive.

 

[CrashWire]

Another twist is something called a charitable remainder trust. Some charities are very happy to arrange them. The charitable reminder trust in this case pays $X/month (escalating ideally) to his surviving spouse then, when she passes on, splits any residual between siblings and the charity. For example.

They could also set up a proper "normal" trust, like many people have done for hundreds of years:

https://www.moneysense.gov.sg/articles/2018/10/estate-planning-what-is-a-trust

 

[electrum]

Suggest you seek legal advice instead of relying on Google and forum answers.

Yes, I would most certainly seek legal advice b4 I actually draw up a Will. In the meantime, I thought I would tap on the vast learning and experience of those on this forum

 

[BBCWatcher]

They could also set up a proper "normal" trust, like many people have done for hundreds of years:

Sure, but charitable remainder trusts are popular in part because the family members don’t have to set up the trust or pay for it. The charity handles that, and the charity’s planned giving department/staff specialize in this sort of thing. Plenty of people have charitable causes they care about, so it’s often a very natural fit all around.

 

[electrum]

Sure, but charitable remainder trusts are popular in part because the family members don’t have to set up the trust or pay for it. The charity handles that, and the charity’s planned giving department/staff specialize in this sort of thing. Plenty of people have charitable causes they care about, so it’s often a very natural fit all around.

Thank you for all your suggestions! For charitable remainder trusts, the residual goes to the charity right? What if u wanted the residual to go to yr own nominees? Is there something similar? Of course, it would not be free then

 

[BBCWatcher]

Thank you for all your suggestions! For charitable remainder trusts, the residual goes to the charity right? What if u wanted the residual to go to yr own nominees? Is there something similar? Of course, it would not be free then

The parameters of a charitable remainder trust are pretty much whatever you and charity agree to, but yes, the charity needs to win something that'll more than cover the costs of arranging and administering the trust.

As CrashWire pointed out an "ordinary" private trust is the typical alternative if you don't want a charity arranging the trust.

 

[luvpraline]

Sure, but charitable remainder trusts are popular in part because the family members don’t have to set up the trust or pay for it. The charity handles that, and the charity’s planned giving department/staff specialize in this sort of thing. Plenty of people have charitable causes they care about, so it’s often a very natural fit all around.

This sounds like a good option for people who are keen to leave their assets to charity should their beneficiaries die. In this case, one has to write to the charity and ask if they would be keen to set up the charitable remainder trust and hope that the amount is worthwhile to them to do so?

 

[electrum]

Is that “normal”?

It’s very easy, actually, thanks to life annuities. He can either purchase a life annuity now (probably a good idea since then he can choose) or in death. A life annuity would provide monthly income in this case to his surviving spouse for the rest of her life however long it lasts. That monthly income would support her dignified (or even better than that) lifestyle for the rest of her days. And as long as the payor is a high quality one she can’t screw it up. (A lump of cash she might.)

Another twist is something called a charitable remainder trust. Some charities are very happy to arrange them. The charitable reminder trust in this case pays $X/month (escalating ideally) to his surviving spouse then, when she passes on, splits any residual between siblings and the charity. For example.

Yet another option is he could do all that now (or almost all): buy a joint/survivor (or joint/contingent, or two separate) life annuity(ities) for himself and his spouse and give his siblings some money now. And perhaps enjoy it with them while everyone is still alive.

Thanks.

Both the life annuity and trust option would ensure that Mrs X will receive income during her lifetime while the residue goes to other nominees. But one problem is that she would be limited to only the income streams and would not be able to access the principal in the event a large amount is required for whatever reason.

I wonder if a simple joint-separate-account would work, Not between Mr and Mrs X But between Mrs X and a nominee of Mr X. During Mrs X's lifetime, she will have full access and be able to draw down from this Joint Ac whatever amount she requires, even to zero if necessary. On her passing, Mr X's nominee will obtain ownership of the residue in the Joint Ac. This nominee will hold the residue on trust for all of Mr X's intended beneficiaries and will as soon as possible distribute the residue accordingly. This "trust" can be an actual legal document or more likely, just really based on sibling trust and understanding. This same sibling trust will necessarily have to be relied upon to ensure that the nominee does not draw down any funds from the Joint Ac while Mrs X lives

 

[BBCWatcher]

Both the life annuity and trust option would ensure that Mrs X will receive income during her lifetime while the residue goes to other nominees. But one problem is that she would be limited to only the income streams and would not be able to access the principal in the event a large amount is required for whatever reason.

There’s nothing preventing you from doing both. You’re not required to spend your entire net worth on a life annuity.

One simple approach is you obtain a life annuity for your spouse, also give her a lump sum, and give any other beneficiaries lump sums. Then she decides what she wants to do with her estate.

 

[highsulphur]

Thanks.

Both the life annuity and trust option would ensure that Mrs X will receive income during her lifetime while the residue goes to other nominees. But one problem is that she would be limited to only the income streams and would not be able to access the principal in the event a large amount is required for whatever reason.

I wonder if a simple joint-separate-account would work, Not between Mr and Mrs X But between Mrs X and a nominee of Mr X. During Mrs X's lifetime, she will have full access and be able to draw down from this Joint Ac whatever amount she requires, even to zero if necessary. On her passing, Mr X's nominee will obtain ownership of the residue in the Joint Ac. This nominee will hold the residue on trust for all of Mr X's intended beneficiaries and will as soon as possible distribute the residue accordingly. This "trust" can be an actual legal document or more likely, just really based on sibling trust and understanding. This same sibling trust will necessarily have to be relied upon to ensure that the nominee does not draw down any funds from the Joint Ac while Mrs X lives

what is stopping Mrs X from drawing down the entire balance in the joint account and put it under her sole name?

 

[electrum]

what is stopping Mrs X from drawing down the entire balance in the joint account and put it under her sole name?

Mr X's main priority is to look after Mrs X's needs He does not mind if Mrs X needs to use up all the Jt Ac funds. He just prefers that any unused funds be left for his own nominees. Essentially, Mr X will tell Mrs X " You are free to draw down any or all of the monies in the Jt Ac as long as it is for your own use but not for the purpose of adding to Mrs X's own bequests"

So there is nothing to prevent Mrs X from immediately withdrawing everything irrespective of need except trust and belief that his wife will honour his wishes. Same as trust that Mr X's nominee will also not draw down anything in Mrs X's lifetime.

As an eg, say Mr X puts $2mm into the Jt Ac. Upon his death, Mrs X starts withdrawing $10k a month. If she lives for 24 months after Mr X's passing, she would have drawn $240k and the bal plus interest goes to the other Jt Ac holder. If she requires funds for any pressing needs, she has access to all the bal in the Jt Ac

 

[highsulphur]

Mr X's main priority is to look after Mrs X's needs He does not mind if Mrs X needs to use up all the Jt Ac funds. He just prefers that any unused funds be left for his own nominees. Essentially, Mr X will tell Mrs X " You are free to draw down any or all of the monies in the Jt Ac as long as it is for your own use but not for the purpose of adding to Mrs X's own bequests"

So there is nothing to prevent Mrs X from immediately withdrawing everything irrespective of need except trust and belief that his wife will honour his wishes. Same as trust that Mr X's nominee will also not draw down anything in Mrs X's lifetime.

As an eg, say Mr X puts $2mm into the Jt Ac. Upon his death, Mrs X starts withdrawing $10k a month. If she lives for 24 months after Mr X's passing, she would have drawn $240k and the bal plus interest goes to the other Jt Ac holder. If she requires funds for any pressing needs, she has access to all the bal in the Jt Ac

What i am saying is there is nothing to stop Mrs X to draw out the cash and put into her own account and thereby "adding to her own bequest". She can draw the entire 2m one shot and put it under her own account. The bank is not able to stop her from doing so

 

[yoongf]

The reality is abt identifying an executor who is willing to deal with these issues throughout the lifetime of the spouse. Old woman can really be problematic.

 

[highsulphur]

The reality is abt identifying an executor who is willing to deal with these issues throughout the lifetime of the spouse. Old woman can really be problematic.

Better leave something for the executor for his or her trouble