Albuquerque Contingent Trust Lawyer

If you are concerned about what might happen to your assets in certain situations, you can form a contingent trust to take ownership of them for safekeeping. The most common scenario for using a contingent trust is in case both spouses in a couple die while their children are still minors.

However, there are other possible uses of a contingent trust, including for individuals who own certain types of illiquid but highly valuable assets, such as a business, a complex investment, or real estate properties.

A contingent trust can be the perfect tool for your estate if you want security for your assets — especially in cases where your intended beneficiaries might find themselves in an undesirable or inconvenient situation. You can also use contingent beneficiaries as a strategy to guarantee that your assets are distributed to someone you want to have them in case your first choice is unable or unwilling to receive them.

You can talk to an Albuquerque contingent trust lawyer at New Mexico Financial & Family Law to go over all of your options — and your opportunities — for using this unique trust arrangement. Schedule a no-obligation consultation and estate plan review today when you call our offices at (505) 503-1637 or contact us online.

How Can an Albuquerque Contingent Trust Attorney Help Me?

Setting up a contingent trust requires even more consideration than a usual trust. The trust creator (called a grantor, settlor, or trustor) needs to have the appropriate legal language to create the trust.

Usually, this language will be located in their last will and testament, but they may also be able to use an equivalent legal document, provided it has been properly executed.

The grantor needs to carefully consider the conditions that might trigger the creation of their trust. In addition, they need to make key decisions about what happens to the other assets in their estate, such as if they want them all to go into the contingency trust or if they would prefer to have some remain separated for a particular reason.

You can discuss all of the important details about forming a contingency trust with an experienced Albuquerque contingent trust attorney. Your attorney will help you understand all of the preparation needed, including the language you should use to make sure the trust is enactable, enforceable, and capable of achieving your goals.

When you meet with an Albuquerque trust lawyer, they can help you with the following tasks and major decisions:

• Determining what conditions would trigger the contingency trust
• How you want the trust to be structured, such as by creating a dynasty trust that can last multiple generations or a charitable remainder trust that can provide a tax-advantaged giving structure
• Naming beneficiaries and how you want them to receive distributions; for example, you can have the trust make monthly payments to a child’s guardian for the child’s qualified living and health expenses, and when the child reaches a certain age (e.g., 25) they can receive the remainder of the trust’s assets in one large distribution
• Planning for all trust expenses, including maintenance costs, trustee compensation, and taxes
• Fitting the trust into your larger estate plan, such as deciding if you want some assets to pass through your will or into a separate trust, rather than your entire estate going into the contingency trust
• Selecting a reliable trustee, whether it is someone you know personally or a professional services provider
• Drafting a will instrument (or other valid instrument) that is capable of creating the trust at the time and in the manner you intended
• Anticipating possible challenges or setbacks, such as an unexpectedly high estate tax burden or the presence of a volatile economy when your trust is formed
• Going over other options you can use in addition to (or possibly instead of) a contingent trust in order to achieve all of your estate planning and family financial planning goals

New Mexico Financial & Family Law has decades of experience assisting people like you with trust formation and estate planning. Our Albuquerque contingency trust law firm offers personalized service, meaning we approach every client with respect to their unique goals and financial situation.

With our assistance, you can create a contingency trust that leaves you feeling confident that, no matter what happens, your loved ones and most precious assets will be cared for.

How Does a Contingency Trust Work?

All trusts involve three important categories of people:

• A grantor transfers assets they own into a legal entity known as a trust
• A trustee assumes control of the trust, making them responsible for ensuring that the trust gains value, pays out to beneficiaries, and is generally handled in ways the grantor intended
• A beneficiary receives distributions (e.g., cash payments from trust proceeds); these distributions can occur on a set schedule, such as once annually, or at the trustee’s discretion, in accordance with terms set when the trust was created

What makes a contingency trust special is that it may never be formed. As their name states, the creation of these trusts is wholly contingent on certain conditions, which are laid out by the grantor.

Forming an Albuquerque Contingency Trust for Parents of Minor Children

As mentioned above, the most common type of contingency trust is one that might be created when a parent dies and leaves behind minor children.

Legally, minors have no right to receive assets from an estate, even if a will promises these assets to them when their parent dies. The usual workaround is for a court to establish guardianship. Sometimes, a guardian is named in the will (which is always advisable for couples with minor children), but the guardianship process can take time while leaving a lot of legal uncertainty.

Meanwhile, the child could be in need of funds for their schooling, healthcare, necessary travel, and other expenses.

To avoid this situation, parents can include language in their will requesting that some (or all) of their estate be used to form a trust in the event that they die while their children are still minors. The language should specifically describe the situation (e.g., both parents die at the same time), name a trustee, and provide instructions for the trustee.

All of this information does not need to be included in the will’s contingency trust provision. Instead, the will could mention the trust and refer the estate’s personal representative to documents that can be easily accessed.

These contingency trust formation documents should also be signed by the testator/grantor, preferably in the presence of at least two non-interested witnesses.

When the trust is formed, it takes total ownership over the assets that the parents want to go to their children. The trust can also make regular payments to the child’s guardian, according to the terms set forth by the grantor.

Usually, these payments have a specific purpose, such as for necessary clothing, food, healthcare, schooling, travel to visit family, and general “maintenance,” which can include a set amount for toys and other non-essential (but enjoyable) goods. The guardian may also be given reasonable compensation for upholding their duties.

Meanwhile, the trustee is responsible for overseeing the contents of the trust. Usually, the bulk of a trust will consist of an investment portfolio. Accordingly, the trustee is expected to make sound decisions about when to buy, sell, or hold onto securities.

A trustee may also be tasked with ensuring the maintenance of a piece of real property, such as by hiring crews to regularly inspect and repair a family home. The trustee can also be given instructions as to when to sell the home, if cash is needed or conditions change to the extent that the home is no longer a desirable asset, compared to other investment and living opportunities.

Distributing Trust Funds Directly to a Child When They Are an Adult

The contingency trust’s establishing language should also describe what will happen when the child beneficiary reaches 18, the legal age of majority. Available options include:

• Transferring the beneficiary’s entire interest to them at once or in several installments in a short time frame
• Paying the beneficiary a limited “allowance” until they reach a certain age or certain conditions are met; for example, a contingency trust might require the beneficiary to obtain a bachelor’s degree before they are eligible to receive their total portion of the trust
• Paying the beneficiary distributions for a longer period, such as 30 years, before the remainder is transferred to them at once
• Giving the beneficiary discretionary powers to change the trust or assume the role of the trustee when they reach a certain age
• Setting aside certain funds for a specific purpose, such as for the beneficiary to travel, pay for a wedding, or get ready to have their first child

Ensuring Trustees Comply With Your Wishes

Most contingency trusts are formed at the time of the grantor’s death. Further, the only beneficiaries of the trust, in most situations, are likely to be minors.

Because of this situation, no one is in an immediate position to hold the trustee accountable for their fiduciary duty.

Normally, beneficiaries are the only party who can challenge a trustee’s actions. Note that courts have upheld the right of beneficiaries of a contingent trust to do so — at least in Texas.

A guardian may be able to monitor the trustee’s actions and sue on behalf of their ward, but a more direct and efficient mechanism is to install someone to oversee the trustee.

Grantors have the right to establish a trust protector. This is a special role, one responsible for ensuring that the trustee upholds the intentions of the grantor and soundly manages the trust for the sake of beneficiaries.

To help the trust protector fulfill their role, the grantor should specifically outline their duties along with how they are expected to monitor the trustee. For example, will they just be receiving reports self-generated by the trustee, or does the protector have a duty to look more deeply, such as by hiring a forensic accountant when there is a suspicion of malfeasance?

The grantor should also establish criteria for removing the trustee, in case they violate their fiduciary duty. A trust protector’s ability to succeed in a legal challenge often depends on the instructions they were given, so the more detail and examples can be provided, the better.

Other Situations Where a Contingent Trust Might Make Sense

A contingent trust is not only useful in a situation where there are orphaned minor children. Other possible scenarios where an Albuquerque contingent trust might be beneficial include:

• A grantor becomes incapacitated, and they want to ensure their business or other financial activities can be seamlessly handled, which can sometimes be done more quickly and easily by a trustee compared to someone with power of attorney.
• An illiquid asset, like a business or valuable piece of real estate, is part of the grantor’s estate. Since it might make more sense to leave the asset intact (at least for the short-term, as in the next 5-10 years), the asset can be placed in a trust, with proceeds going to beneficiaries, as opposed to the asset being immediately liquidated so its proceeds can be divided among heirs
• Similarly, legal changes or unfavorable market conditions might make it more practical for an asset to reside in a trust rather than being distributed at the time of the grantor’s death. For example, changes to laws might make it impossible to legally sell a cannabis-related business; the business can reside in trust until laws become more favorable or until the beneficiaries can mutually agree on a plan to capture the business’s value and divide it among them.

There are many creative uses of a contingency trust. Speak with an Albuquerque contingency trust attorney about your challenges to see if creating this type of trust can be the most efficient and secure way to solve them.

What Is a Contingent Beneficiary?

A contingent beneficiary is different than a contingent trust. The term usually refers to a secondary beneficiary who can claim the interests of a primary beneficiary if the first choice dies, cannot be contacted, or refuses their right to receive a distribution.

Get Creative and Prepare for Anything That Lies Ahead With an Albuquerque Contingent Trust Law Firm

New Mexico Financial & Family Law is ready to help you and your family plan for the future — no matter what lies ahead. One of our Albuquerque contingency trust lawyers can help you decide on the best way to structure your trust, including what instructions to leave to ensure your wishes are easy to understand and execute.

Learn more about your options, and start forming the perfect trust for your needs when you call our Albuquerque trust law firm to schedule a no-obligation consultation and estate plan review. Reach us today at (505) 503-1637, or contact us online.