By Sam A. Moak
The Legal Corner
The information in this column is not intended as legal advice but to provide a general understanding of the law. Some of the information in this column was provided by the Humane Society of the United States. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.
Some of the more common questions I encounter when assisting clients with their estate plans are: “Who should receive my property?” There are so many decisions to make since my spouse passed, I need to make these decisions myself. Should I give property to the children? Outright or in trust? Is there a best age for them to receive the property? And what if one of them were to pass away before I do? The grandchildren are still too young to manage property. What happens to the loan I have made to my son/daughter? Should I forgive that loan? And what about my dog?”
If any of these questions have come to your mind, you're not alone. These are very common questions.
Ben Franklin, yes, that Ben Franklin of historical fame, addressed many of these issues in his will. So this week, I thought we might review old Ben’s will.
Franklin gave his son William all of his property in Nova Scotia “to hold to him, his heirs and designs forever.” William is what we consider a primary beneficiary because he received the property outright from the will.
You may own specific property such as land, a home or a family heirloom, that you want transferred to a particular person or primary beneficiary. This is a common starting point for planning your estate distributions.
Franklin owned three homes on Market Street in Philadelphia, other property within Philadelphia and pasture land outside the city. He transferred the right to use that property together with his “silver plate, pictures and household goods” to his daughter Sarah Bache and her husband Richard Bache for use “during their natural lives.”
This gift, or bequest, created a life estate. You may have a home or other real property and desire for a particular person to use that property for his or her lifetime. A life estate is an excellent way to give a person life use of property.
After the lives of Sarah and Richard Bache, the property in Philadelphia that they used was transferred to their children, Ben Franklin’s grandchildren. This property was then solely owned by Franklin’s grandchildren.
Following a life estate, the property is usually transferred outright to the remainder or final beneficiaries. If you create a life estate for a person, then you may also designate a person or perhaps a charitable organization to own the property after your life tenant passes away.
It was Franklin’s intent to transfer property to his daughter and son-in-law for life, with the final distribution to his grandchildren. But what if one of the grandchildren were to pass away prior to the demise of both parents? Franklin indicated that if one of the grandchildren were “to die under age, and without issue,” that share would be “equally divided among the survivors.” This is an example of a contingent beneficiary.
A contingent beneficiary is the person who will receive the property if the first person is not living at the time of the transfer. For example, you may wish to give a gift through your Will to a brother or sister. But if he or she passes away before you do, then it is important to select another person to receive the property.
Franklin thought of this too. He realized some of his grandchildren might be young if and when their parents passed away. Franklin stated in his Will that some of them are “under age” and “may not have capacity” to manage the property. Therefore, he ordered the Supreme Court of Pennsylvania to select “three honest, intelligent, impartial men” to manage the property.
If your estate plan includes young children, then you will want to create a trust to manage property for the benefit of the children. The trust should work to provide a distribution of income and, if needed, principal from the trust to the child until the recipient reaches an age you designate for distribution of the assets.
Finally, another common area Franklin addressed was debt owed by his children. Like many, he had made loans to his children. As is often the case, he decided to forgive the loans and indicated he would discharge his son-in-law “from all claim and rent of moneys due to me.”
If you have made loans to friends or family members, it is very possible you may choose to forgive those loans. In effect, you are forgiving the debt and giving back the note or other obligation. If this is not done properly in your Will, then you may leave quite a mess for your family to sort out.
While there is a plethora of information on the internet in this area, I caution you to be careful. What you find on the internet may not be valid under Texas law. Therefore, before making formal arrangements regarding your estate plans, seek help from an attorney, licensed to practice law in Texas, who can guide you in preparing the legal documents necessary to protect your interests and make the process of implementing your goals easier.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a member of the State Bar College and the Real Estate, Probate and Trust Law Section of the State Bar of Texas.