In all States in the Chicago Region, specifically named persons or entities, or categories
such as parents, siblings, children, issue, or descendants, are considered residual
beneficiaries. The grantor’s estate or the administrator of the estate is not a residual
beneficiary. If the trust provides that, upon the beneficiary’s death, the trust will
reimburse the state for medical assistance provided during the beneficiary’s lifetime,
the state generally should be considered a creditor, not a residual beneficiary of
the trust, unless there is a clear intent that the state is an intended beneficiary
of the trust, rather than a mere creditor. See Section 5 below for information on
Ohio.
In the past, as a general rule in trust law, “heirs,” “heirs at law,” “next of kin”,
“survivors,” and similar terms were not residual beneficiaries. In the Chicago Region,
Illinois, Indiana, Minnesota, and Ohio followed this general principal, while Michigan
and Wisconsin had recently begun to consider heirs to be residual beneficiaries.
A Restatement of the Law (Third) of Trusts was published in April, 2003, replacing
the Restatement (Second), published in 1959. The new Restatement draws on court decisions
and statutes to provide a contemporary treatment of trust law, offering authoritative
guidance to legislators, judges, and attorneys.
According to this Restatement, the legal community now assumes, absent evidence to
the contrary, that most grantors intended to create a remainder interest when they
name heirs, next of kin, and the like to receive the remaining assets in the trust
upon the grantor’s death. Therefore, they are considered to be residual beneficiaries
and the trust is considered irrevocable.
For trusts created after 1955, in the absence of an indication of a contrary intent,
you may assume that the grantor intended to name residual beneficiaries by naming
their heirs, heirs at law, survivors, or persons entitled to inherit on their death
intestate or under the statute of descent and distribution. If there are such residual
beneficiaries, the grantor cannot unilaterally revoke the trust, unless the grantor
reserved the right to do so. This change of position is effective August 11, 2003.
Trusts in this category are considered to have residual beneficiaries from the time
that they were created, even if they were created before August 11, 2003. Where a
final decision is questioned based upon this change of position, refer to POMS SI 04070.040.
Refer the trust to the Regional Office, for possible referral to the Office of the
General Counsel for a legal opinion as to whether the trust is revocable if the trust
does not reserve the power to revoke, was created in 1955 or before, and names only
the grantor’s heirs, heirs at law, survivors, persons entitled to inherit on their
death intestate or under the statute of descent and distribution, or the like, to
receive remaining trust assets on the death of the grantor.
Where the trust states only that the grantor’s own estate will receive any remaining
trust assets on the grantor’s death, and names no other beneficiaries to the trust,
the trust should be considered revocable.
If the trust states only that assets will be distributed according to the grantor’s
Last Will and Testament, send the case to the Regional Office, Center for RSI/SSI
for referral to the Office of the General Counsel.
For trusts created after 1971, in the absence of any trust language indicating a contrary
intent, you may assume that the grantor intended to name residual beneficiaries by
naming their heirs, heirs at law, survivors, or persons entitled to inherit on their
death intestate or under the statute of descent and distribution. If there are such
residual beneficiaries, the grantor cannot unilaterally revoke the trust, unless the
grantor reserved the right to do so. This change of position is effective August 11,
2003. Trusts in this category are considered to have residual beneficiaries from the
time that they were created, even if they were created before August 11, 2003. Where
a final decision is questioned based upon this change of position, refer to POMS SI 04070.040.
Refer the trust to the Regional Office, for possible referral to the Office of the
General Counsel for a legal opinion as to whether the trust is revocable if the trust
does not reserve the power to revoke, was created in 1971 or before, and names only
the grantor’s heirs, heirs at law, survivors, persons entitled to inherit on their
death intestate or under the statute of descent and distribution, or the like, to
receive remaining trust assets on the death of the grantor.
Where the trust states only that the grantor’s own estate will receive any remaining
trust assets on the grantor’s death, and names no other beneficiaries to the trust,
the trust should be considered revocable.
If the trust states only that assets will be distributed according to the grantor’s
Last Will and Testament, send the case to the Regional Office, Center for RSI/SSI
for referral to the Office of the General Counsel.
Effective April 1, 2000, any trust that indicates that upon the beneficiary’s death,
assets will be paid to heirs at law, heirs, next of kin, relatives, family, distributees,
or similar language is considered to have residual beneficiaries, unless there is
evidence that the individual intended that this language create only a reversionary
interest in the grantor. Trusts using such language are considered to have residual
beneficiaries from the time that they were created, even if they were created before
April 1, 2000.
If the trust states only that assets will be distributed according to the grantor’s
Last Will and Testament, send the case to the Regional Office, Center for RSI/SSI
for referral to the Office of the General Counsel.
For trusts created prior to 1939, a grantor could not create a remainder interest
in their heirs, next of kin, or the like; rather, such language created only a reversionary
interest in the grantor. Such language would not create additional beneficiaries who
could prevent the grantor from revoking the trust.
For trusts created after 1939, in the absence of a contrary intent, you may assume
that the grantor intended to name residual beneficiaries by naming their heirs, heirs
at law, survivors, or persons entitled to inherit on their death intestate or under
the statute of descent and distribution. If there are such residual beneficiaries,
the grantor cannot unilaterally revoke the trust, unless the grantor reserved the
right to do so. This change of position is effective August 11, 2003. Trusts in this
category are considered to have residual beneficiaries from the time that they were
created, even if they were created before August 11, 2003. Where a final decision
is questioned based upon this change of position, refer to POMS SI 04070.040.
If the trust states only that assets will be distributed according to the grantor’s
Last Will and Testament, send the case to the Regional Office, Center for RSI/SSI
for referral to the Office of the General Counsel.
For trusts governed by Ohio law, if the trust meets the Medicaid Payback trust criteria
of Section 1917(d)(4) of the Act (see POMS SI 01120.203), and if the trust states that it is irrevocable, then the trust should be considered
irrevocable, regardless of whether any residual beneficiaries are identified in the
trust.
For trusts created January 1, 1999, or later, a residual beneficiary generally can
be assumed to exist, absent evidence of contrary intent on the part of the grantor,
if the trust indicates that, upon the grantor/beneficiary’s death, assets will be
paid to the grantor’s “heirs,” “heirs at law,” “next of kin,” “relatives,” “family,”
“distributees” of the grantor’s estate, or a term that has similar meaning. Therefore,
trusts that contain this language for distribution of remaining assets generally should
be considered irrevocable, unless the evidence suggests that such designation was
not intended to create a beneficial interest in any individual other than the grantor
, or unless the grantor reserved the power to revoke or amend the trust. A trust should
be referred to the Regional Office, for possible referral to the Office of the General
Counsel, if the trust was created prior to January 1, 1999, contains such language
for distribution of remaining assets, and identifies no other beneficiaries.
Where the trust states only that the grantor’s estate will receive any remaining trust
assets on the grantor’s death, and names no other beneficiaries to the trust, the
trust should be considered revocable, absent evidence that the grantor intended to
designate beneficiaries other than their own estate.
If the trust states only that assets will be distributed according to the grantor’s
Last Will and Testament, send the case to the Regional Office, Center for RSI/SSI
for referral to the Office of the General Counsel.