King & Wood, P.A.

How Can You Disinherit Someone and Be Sure it Sticks?

“Parents may delay creating an elder law estate plan, because of the in-law issue. Some parents are unfortunately estranged from an adult child, only because of the problematic son-in-law or daughter-in-law.”

Let’s say you want to leave everything you own to your children, but you can’t stand and don’t trust their spouses. That might make you want to delay making an estate plan, because it’s a hard thing to come to terms with, says a recent article “Dealing with disinheritance, spouses” from the Times Herald-Record. There are options, but make the right choice, or your estate could face challenges.

Some people choose to leave nothing at all for their child in the will, so that if there is a divorce or if the child dies, their assets won’t end up in the daughter or son-in-law’s pocket. For some parents, particularly those who are estranged from their children, this can create more problems than it solves.

Disinheriting a child with a will is not always a good idea. If you die with assets in your name only, they go through the court proceeding called probate, when the will is used to guide asset distribution. The law requires that all children, even disinherited ones, are notified that you have died, and that probate is going to occur. The disinherited child can object to the provisions in the will, which can lead to a will contest. Most families engaged in litigation over a will become estranged—even those that weren’t beforehand. The cost of litigation will also take a bite out of the value of your estate.

A common tactic is to leave a small amount of money to the disinherited child in the will and add a no-contest clause in the will. The no-contest clause expressly states that anyone who contests the will loses any right to their inheritance. Here is the problem: the disgruntled child may still object, despite the no contest clause, and invalidate the will by claiming undue influence or incapacity or that the will was not executed properly. If their claims are valid, then they’ll have great satisfaction of undoing your planning.

How can you disinherit a child, and be sure that your plan is going to stand up to challenge?

A trust is better in this case than a will. Not only do trusts avoid probate, but (unless state law requires otherwise at death) the children do not receive notice of the creation of a trust. An inheritance trust, where you leave money to your child, names a trustee to be in charge of the trust and the child is the only beneficiary of the trust. The child might be a co-trustee, but they do not have complete control over the trust. The spouse has no control over the inheritance, and you can also name what happens to the assets in the trust, if the child dies.

This kind of planning is called “controlling from the grave,” but it’s better than not knowing if your child will be able to protect their inheritance from a divorce or from creditors.

With a national divorce rate around fifty percent, it’s hard to tell if the in-law you welcome with an open heart, will one day become a predatory enemy in the future, even after you are gone. The use of trusts can ensure that assets remain in the bloodline and protect your hard work from divorces, lawsuits, creditors and other unexpected events.

Reference: Times Herald-Record (June 6, 2020) “Dealing with disinheritance, spouses”

 

How Bad Can a Do-It-Yourself Estate Plan Be? Very!

“One Justice from the Florida Supreme Court commented that the expensive litigation far outweighed any savings resulting from the pre-printed form.”
Here’s a real world example of why what seems like a good idea backfires, as reported in The National Law Review’s article “Unintended Consequences of a Do-It-Yourself Estate Plan.”
Mrs. Ann Aldrich wrote her own will, using a preprinted legal form. She listed her property, including account numbers for her financial accounts. She left each item of property to her sister, Mary Jane Eaton. If Mary Jane Eaton did not survive, then Mr. James Aldrich, Ann’s brother, was the designated beneficiary.
A few things that you don’t find on forms: wills and trusts need to contain a residuary, and other clauses so that assets are properly distributed. Ms. Aldrich, not being an experienced estate planning attorney, did not include such clauses. This one omission became a costly problem for her heir that led to litigation.
Mary Jane Eaton predeceased Ms. Aldrich. As Mary Jane Eaton had named Ms. Aldrich as her beneficiary, Ms. Aldrich then created a new account to receive her inheritance from Ms. Eaton. She also, as was appropriate, took title to Ms. Eaton’s real estate.
However, Ms. Aldrich never updated her will to include the new account and the new real estate property.
After Ms. Aldrich’s death, James Aldrich became enmeshed in litigation with two of Ms. Aldrich’s nieces over the assets that were not included in Ms. Aldrich’s will. The case went to court.
The Florida Supreme Court ruled that Ms. Aldrich’s will only addressed the property specifically listed to be distributed to Mr. James Aldrich. Those assets passed to Ms. Aldrich’s nieces.
Ms. Aldrich did not name those nieces anywhere in her will, and likely had no intention for them to receive any property. However, the intent could not be inferred by the court, which could only follow the will.
This is a real example of two basic problems that can result from do-it-yourself estate planning: unintended heirs and costly litigation.
More complex problems can arise when there are blended family or other family structure issues, incomplete tax planning or wills that are not prepared properly and that are deemed invalid by the court.
Even ‘simple’ estate plans that are not prepared by an estate planning lawyer can lead to unintended consequences. Not only was the cost of litigation far more than the cost of having an estate plan prepared, but the relationship between Ms. Aldrich’s brother and her nieces was likely damaged beyond repair.
Reference: The National Law Review (Feb. 10, 2020) “Unintended Consequences of a Do-It-Yourself Estate Plan”