There are three types of living trust beneficiaries:
- Specific beneficiaries, who receive specific property
- Primary beneficiaries, who receive any property not distributed to specific beneficiaries
- Alternate beneficiaries, who receive property if the primary beneficiary dies before the creator of the living trust
In general, you can choose any person or entity you want to be your beneficiary. In a community property state, you are not required to leave anything to your spouse.
Distributing Property to Your Spouse in Living Trusts
In community property states, your spouse may be able to invalidate part of your trust if you leave him or her with less than a certain amount of your property (usually between one-third and one-half). If a court finds that your spouse has a valid claim, your trust won't be completely invalidated. Instead, the court will modify your trust to accommodate this claim. It is relatively easy to avoid these problems if you designate your beneficiaries carefully.
Distributing Property to Children in Living Trusts
You can leave property to children through a living trust. You can keep your property in trust and designate an adult to manage that property on your child's behalf. This is called a children's subtrust. The subtrust will end when your specified conditions are met (e.g., when your child turns 21). If you want to exclude a child from your trust, you need to say so explicitly. If it seems like you left out one of your children by mistake, a court may modify your trust for that child's benefit.
Designating a Guardian
You can't nominate a guardian for your minor children in a living trust. You should make this designation in a will. This can be a pour-over will, as discussed in Section 3.