Class Gifts in Your Estate Plan: A Good or Bad Idea?

Let’s say that you have an estate plan, and you want to leave your property to your beneficiaries. When you make your will or trust, you would identify your beneficiaries—that is, who is getting what from your estate.

But naming people isn’t the obvious task that it seems to be—and making a mistake can be pretty costly, and end up in probate court.

Specific Gifts or Class Gifts?

You generally have two choices when naming beneficiaries: You can name them by name, but you can also just designate a class of people.

So, using a simple example, you could say “I leave property to Sam, Harry and Shelina, my children,” or you could just leave property “to my biological children,” establishing a designated class. And yes—there is a difference.

The Benefits of Class Gifts

Class gifts can be helpful, especially if you don’t know the exact names of everybody in the class.

For example, let’s say you wanted to leave property in your will or trust to all the employees of a charity, or to any of your kids who might graduate college, or to all relatives of your wife.

You don’t have to worry about tracking down the names of each individual, nor worrying about conflict if you fail to name someone. So long as they meet the class, they get the inheritance.

Drawbacks and Problems

But class gifts can be problematic as well, as they can be overly inclusive.

So, for example, if you just leave your property to “my biological children” or “to my surviving relatives” that could also include children who are estranged, or even children who you don’t have contact with—and in some cases, even biological children who you didn’t even know existed, but who could come out of the woodwork, once there is an inheritance at stake.

And yes, with genetic testing what it is nowadays, the possibility of children or other relatives you didn’t know that you had showing up to claim their stake of your inheritance, is a real possibility.

Specific Gifts

Specific gifts avoid this problem, but are more time consuming because you need to specifically list people, and that may be difficult, especially when you don’t know all the names of people.

What to Do?

The best solution may be a hybrid of both.

So, for example, you might leave property only to “all biological children of my current wife,” or “all employees of my favorite charity who worked there from” certain dates. You could say “all of my relatives who are residing in Florida” as of a given date.

Basically, you are still naming a class, but a “closed end” specifically defined class, to avoid unknowns.

When it comes to children, you can even designate what happens to children that you, at the time of the will, don’t know exist, and spell out what they will get or not get, should they show up or be discovered later on.

Call the West Palm Beach estate planning lawyers at The Law Offices of Larry E. Bray today for an estate plan that works for you, and which avoids legal problems later on.

Sources:

lawshelf.com/coursewarecontentview/changes-in-beneficiaries#:~:text=Class%20gift%3A,ultimate%20number%20in%20the%20class.

thismatter.com/money/wills-estates-trusts/class-gifts.htm