A Simple Will

A simple will is a will that does not include any customization or adaption from the standard baseline. Simple wills are only recommended where:

• The testator is not elderly or, if elderly, has made adequate provision for end of life care and payment of the cost of care.
• The estate is not of sufficient size to face federal or state tax complications.
• There are no foreign spouses, children, or other beneficiaries.
• There are not children of multiple marriages or the testator is absolutely certain that a current spouse will not disinherit the children from a prior marriage.
• There is no property which the testator wishes to preserve for the use of multiple family members or to pass on through the generations (e.g., a family farm or vacation rental).
• The testator understands and agrees that beneficiaries will receive their share outright at age of majority (18 in Kentucky) even if
  • They are not mature enough to handle it.
  • They have creditors who may take a share of it.
  • They are addicted to drugs, have gambling debts, or otherwise make financially poor decisions.
  • They are special needs or disabled.
  • The share received will jeopardize their government benefits.

Typically, the estate is left to a surviving spouse outright or, if there is no surviving spouse, to and to all living children or the descendants of deceased children, in equal shares. If the children or grandchildren are over 18 when the testator dies, they will receive their share outright. If they are under 18, their share will be held by a custodian who will use the funds on their behalf. When the child or grandchild reaches the age of 18, they will receive their share of the estate outright to do with as they wish. No provision is made to hold property of minor beneficiaries past the age of 18. No provision is made for individuals with special needs or disabilities that may entitle them to government benefits.

Contingent Trusts

If a testator is concerned with some of the issues listed above, but the issue is not yet manifest, they may opt for a will with a contingent trust.  The contingent trust provision is only operative if the contingency occurs. These trusts operate like insurance policies which guard against the risks that would arise if the contingency occurred. Many parents and grandparents decide to use a contingent spendthrift trust to delay the outright distribution to a child or grandchild until a specified age or to use a contingent supplemental needs trust provision to protect a disabled or special needs beneficiary.

Will with a Contingent Spendthrift Trust

A contingent spendthrift trust holds a share of the estate for an underage beneficiary until that beneficiary reaches a specified age. The contingency in this case is the beneficiary being below that age at the time the testator dies. The risk is the beneficiary being so young they squander their inheritance. The trust becomes operative in that case and holds their share of the inheritance until they reach the age specified. A trustee manages the property and disperses funds to the beneficiary under the terms of the trust provision.

For example, if Sam and Sue have children who are quite young, they may wish to insert a provision in their will that if they are both deceased and their estate passes to their children, those children only get their share outright if they are above the age of 35. If they are not, the child(ren)’s share will be placed in a trust to be administered by their designated trustee, Sam’s brother Jim, by the terms set forth by Sam and Sue in their wills. In essence, their will will contain the terms of a trust that will only come into existence if they both die and any of their children are under the age of 35.

Will with a Contingent Supplemental Needs Trust Provision

Another common contingent trust provision included in the wills of individuals with minor children or grandchildren is the contingent special needs trust. This type of trust becomes active if, at the time the testator dies, a beneficiary who takes under the will has been deemed disabled by the government. In that case, the share of the estate to be paid to the beneficiary is put into the trust and administered by the terms set out in the will.

If this provision is not included and the beneficiary is disabled, their inheritance may interrupt their benefits and is subject to the state claiming any unused portion of the inheritance upon the death of the beneficiary.

Using a Pour Over Will with a Revocable Living Trust

Wills with contingent trusts typically work well for individuals who do not yet know if a beneficiary will be underage or special needs and who do not have a significant amount of non-probate assets such as 401(k)s, IRAs, investments, benefits with survivor designations, etc. If you have a type of account that allows you to specify a beneficiary upon death, it will NOT pass through your will. It will be paid outright to whomever you have designated on the beneficiary form. In the case of underage or special needs beneficiaries, this may be disastrous as their benefits can be interrupted or terminated.

To prevent an underage beneficiary from receiving these funds outright at age 18 or a special needs beneficiary from receiving them direct irrespective of age, many parents and grandparents use a revocable living trust with contingent provisions. The trust can contain the same terms as a “companion” will, but is in existence the moment it is signed and funded. So the trust can be named as a beneficiary of an non-probate asset or hold the title to non-probate assets such as real estate or vehicles.

While some individuals attempt to overcome this issue by listing their “estate” as their contingent beneficiary after their spouse, this may create unforeseen problems such as additional administrative fees, taxes, etc. It may also result in the loss of tax advantages, such as those granted to IRAs. Further, since the estate does not exist until the testator has died, it cannot hold title to real estate, vehicles, etc.

In contrast, a properly drafted trust can retain tax advantaged status of underlying assets, can hold title to most titled assets, and can receive assets upon the death of the grantor without those assets passing through probate.

Finally, a properly drafted revocable trust can be amended by the grantor at any time prior to death so long as they are legally competent. If the grantor decides the trust is no longer necessary, he or she can either transfer all assets out of the trust or terminate the trust in its entirety. Thus, a properly drafted revocable trust provides the parent or grandparent protection from contingencies while allowing them to make changes or additions.

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