ENSURING THAT YOUR ESTATE GOES TO THOSE YOU WANT IT TO
A fairly common dilemma with which people are often confronted is whether their intention that certain persons should ultimately benefit from their estate will ultimately be realised. If you have a beneficiary or beneficiaries whom you intend benefitting immediately upon your death, then this isn’t an issue. It is when you intend to benefit someone during their lifetime, but to ultimately benefit others that things can get a little complicated.
Typically, this type of scenario is likely to arise where you wish to make your spouse your beneficiary (should he/she survive you, of course), but that you would like your estate to ultimately devolve upon your children (or grandchildren). It is all very well to leave your estate to your spouse on the understanding that on his/her death the children will benefit, but after your death, there is no guarantee that this will happen, and for any number of reasons. Your surviving spouse may, for example, remarry, and leave his estate to his subsequent spouse, or the surviving spouse may succumb to dementia and become subject to manipulation by a carer to whom her estate is left, or similar.
There are various options available to you to ensure that this nightmare scenario is avoided and that your estate ultimately devolves on those you want it to. These would include:
- Executing a joint will together with your spouse in which the first dying leaves their estate to the survivor, and that the estate of the survivor is ultimately left to the children. The Achilles Heel of this approach, however, is twofold; firstly, the surviving spouse may irresponsibly or naively dissipate the estate during their lifetime, leaving little for the ultimate heirs, and secondly, the survivor is always at liberty to execute a subsequent will. The survivor may only, however, deal with their own assets, the assets of the first dying remaining subject to the provisions of the joint will.
- Setting up a testamentary trust under the control of a trustee or trustees tasked with the management of the financial affairs of the trust as prescribed in the will. You can determine what cash or assets should be made available by your trustee/s and specifically who should benefit.
- Establishing a usufruct; basically a right of use. This is generally explained by the analogy of a tree and its fruit. The so-called usufructuary is entitled to the fruit from the tree, but has no right to dispose of or deal with the ‘tree’ in any way, thus leaving the corpus of the estate to the intended ultimate beneficiaries.
- Establishing a fideicommissum, which differs from a usufruct in that the so-called fideicommissary has a limited right to dispose of the corpus of the estate, in addition to enjoying the ‘fruit’.
There is a great deal more to each of these options than I have recorded, but you get the idea. There are a number of ways to get peace of mind and the satisfaction of knowing that your estate won’t fall into the wrong hands, but benefit those you intend to, and without becoming so prescriptive that you would be considered to be ‘ruling from the grave’. In doubt, take advice concerning this important estate planning issue.
Mike Matthews