An estate plan may name an adult child, sibling, or other family member who later becomes unable to manage financial affairs. The original beneficiary designation may remain valid, but distributing inherited assets can become more complicated.

Families should consider what happens when the beneficiary is alive and entitled to inherit but cannot independently manage the property.

The Beneficiary's Legal Rights

An adult beneficiary does not automatically lose inheritance rights because of cognitive decline, illness, or disability.

The beneficiary may remain entitled to receive property under the trust or will. The question is how those rights can be exercised and how the inheritance should be delivered.

A trustee should not simply redirect the beneficiary's share to another family member based on the belief that doing so would be easier.

Reviewing Existing Authority

A valid durable power of attorney may authorize an agent to handle certain financial matters for the beneficiary.

Alternatively, a conservator of the estate may have court-authorized authority to receive and manage property.

The trustee should examine the relevant documents and court orders to determine whether the person requesting payment actually possesses the necessary authority.

Considering the Trust's Distribution Provisions

Some trusts authorize a trustee to retain distributions for a beneficiary who cannot responsibly manage funds. Others permit payment to a legally authorized representative or direct payment for the beneficiary's benefit.

These provisions vary considerably. They should be reviewed before making assumptions about the appropriate distribution method.

If the trust requires an outright distribution and does not provide flexibility, additional legal procedures may be necessary.

Public Benefits and Special Needs

An inheritance can affect eligibility for certain means-tested benefits.

Families should identify whether the beneficiary receives Supplemental Security Income, Medi-Cal, or other benefits before making distributions that may affect eligibility.

Trust modifications or other protective arrangements may be available in some circumstances, but they involve specific legal requirements.

Key takeaways

• Incapacity does not ordinarily eliminate a beneficiary's inheritance rights.

• Confirm the authority of anyone seeking to receive or manage the beneficiary's share.

• Review trust terms and public-benefit consequences before distributing assets.

Planning for an inheritance for an incapacitated beneficiary in California can reduce the need for emergency proceedings. Westlake Village families may benefit from considering this possibility when their estate plans are originally prepared.

This article provides general information, not legal advice. For questions about inheritance planning for an incapacitated beneficiary, call Westlake Law Group at (818) 444-2022. 30699 Russell Ranch Road, North Building, Suite 210, Westlake Village, California. Virtual consultations are available throughout Southern California.

Educational links:

• https://www.ssa.gov/

• https://selfhelp.courts.ca.gov/conservatorship

• https://leginfo.legislature.ca.gov/faces/codes.xhtml