What’s an “Atom Bomb” or “Contingent Remainder” Beneficiary?

When you’re planning your estate, among other things, you decide who should inherit your assets. You choose your beneficiaries, typically your children (or Living Trust depending upon the children’s ages), grandchildren, or other close relatives. But what if all the beneficiaries you’ve chosen and all their descendants have died? Then it would fall to the “contingent remainder” beneficiary.

Often the “contingent remainder” beneficiary has a slang nickname, like the “atom bomb” beneficiary or “exploding turkey” beneficiary. The contingent remainder beneficiary often is given this nickname because it’s a very unusual circumstance. The odds of all your descendants dying before you typically are very low. Of course, that’s not to say it is impossible.

But, still, you should give serious thought to whom you should choose for that role. Sometimes people choose their heirs at law because they think they should or must do so. However, if all your descendants have predeceased you, depending upon state law, that could mean your heirs would be some distant relatives with whom you have little or no relationship in real life.

Sometimes people choose a charity as the contingent remainder beneficiary. Sometimes they choose their alma mater, their church, or the charity to whom they’ve given consistently during their lifetime.

There’s not a wrong choice for the contingent remainder role. But you aren’t required to choose a particular one either. You have no obligation to choose your heirs at law, just because you may share a common ancestor. Give some thought to the decision and name whomever you feel in your heart would be the best recipient for your assets in the event your primary beneficiaries have predeceased you. You’ll be glad you did.

After you’ve chosen your beneficiaries, including your first line beneficiaries like your children (or Living Trust) and the contingent remainder “atom bomb” beneficiary, you’ll sleep better knowing that you’ve covered all your bases. You’ll know that your assets are going where you want them to go, even in the most unlikely of scenarios.

Staying Current is Especially Important in the Pandemic

President Trump and First Lady Melania Trump announced they tested positive for COVID-19. Around the same time, numerous others at the White House also tested positive. In the United States alone, the pandemic has infected over 7.5 million people and has killed nearly 215,000 of them. Worldwide, the pandemic has infected over 36.5 million people and has killed over a million of them. In today’s pandemic, it’s more important than ever to make sure your estate planning documents are current. It’s especially important to ensure your documents relating to your health are up-to-date. Those documents are the Health Care Power of Attorney, the Advance Directive, and the HIPAA Power. It’s important to have several layers of decision-makers.

In the Health Care Power of Attorney you appoint an “Agent” to make health decisions for you when you’re not able to make those decisions for yourself. You can also appoint a successor Agent to make decisions if the first Agent is not available or isn’t able. You can appoint additional successors, too. It’s especially important to name additional successors in today’s pandemic. The fact that President and Melania Trump both tested positive for COVID-19 around the same time demonstrates the importance of naming several successors. It’s all too common nowadays for your initial agent to succumb to the same illness. If you name several successors, especially in a different household, you increase the odds that one of the agents will be unaffected and able to act for you.

An Advance Directive expresses your wishes regarding end-of-life decisions. Without such a clear expression of your wishes, you must be kept alive even if you have no reasonable chance of recovery, even if doing so would prolong your suffering. Sometimes an Advance Directive is called a “Living Will” and often it is combined into the same document as the Health Care Power of Attorney.

The Health Insurance Portability and Accountability Act of 1996 mandates health providers keep your protected health information confidential. While this is primarily a good thing, sometimes you want some people to have access to your protected health information. For example, you want your Health Care Agent to have access to your information so they can make informed decisions regarding your health. Also, you want fiduciaries such as the Agent under a Financial Power of Attorney and the successor Trustee of your Trust to be able to have access so they can know if they need to step in to manage your financial affairs, which is their duty. A HIPAA Power grants access to your protected health information to those whom you designate. In fact, without such a power, your loved ones might not even know you’re in the ICU with COVID-19.

It’s important to have these three documents, but it’s also important to keep them up-to-date and to name successors in them. All too often in the current pandemic, the illness impacts more than one person in the family or locality. If there’s no successor appointed (or that successor is also incapacitated) there can be delays in getting consents for different treatments or implementing end-of-life decisions. So, perhaps you name your spouse first, then your adult child, then your brother or sister, etc. Keep in mind the importance of naming successors who aren’t in your same household and maybe not even in the same locality.

Today’s pandemic is hard on all of us. Precautions like washing your hands, social distancing, and wearing a mask can make all of us safer. Keeping your estate planning documents up-to-date helps ensure that, if the precautions don’t work, your loved ones and fiduciaries can help you through the illness and make it easier for you and your loved ones.