When considering your estate plan, one of the things you will have to think about is who your beneficiaries will be. If you have a significant estate, this decision is made even more complex. How will you divvy up your assets, who will receive an inheritance and are there those who you will deliberately exclude?
The decision to leave close family members out of your estate plan is one wrought with difficulty, and it is without doubt an emotional experience. It is surely not a decision made lightly, and it brings with it a lot to think about from a personal and legal standpoint. For the sake of this discussion, we will refer to disinheriting a child, but the advice is also applicable to other close family members.
You certainly have your reasons for disinheriting a child or choosing to leave them out of your estate plan. Maybe they are not particularly smart with money and you feel they wouldn’t properly handle the inheritance. Maybe they have an addiction to drugs, alcohol or gambling that you do not want to financially support.
If you do decide to disinherit your child, it should be handled carefully so that your wishes are upheld in the chance that the child should contest your will. Be meticulous in documenting your decision to disinherit. Be sure to give proper proof that you are of sound mind when making the decision. An interview video of you at the time of signing the will, in which you comment on your decision, can be helpful, as can letters from your primary care physician establishing your health and ability to make decisions.
Ultimately, your decision to leave a child out of your estate plan is not done out of malice. And, there are other options that you may want to consider. If your son or daughter has a family of their own, you could use a “Skip Bequest” to leave a share of your estate directly to your grandchildren in a trust with another close family member named as trustee. This may be an agreeable compromise – providing for your loved ones, while still maintaining the integrity of your decision to disinherit.
Similarly, if the reason for disinheriting a child is a current circumstance, such as a lack of direction or motivation, a poor grasp on handling finances, and/or a destructive addiction, you may want to consider an Incentive Trust. With an Incentive Trust, you can put conditions on the receipt of trust benefits. If they hold a steady job, for example, or remain drug-free for a set period of time, they would become eligible to receive benefits.
One important thing to remember is that leaving a child out of your estate plan does not mean leaving them out completely. Be sure to mention them by name. If you fail to mention them, a court may consider this to have been an inadvertent mistake and insert them as an heir. Additionally, it may not be smart to leave them nothing. While it may seem counterintuitive, if you have a No Contest Clause in place, it could be in your best interest to leave the disinherited child a small amount. A No Contest Clause works to discourage heirs from contesting a will by stating that anyone who unsuccessfully challenges the will, likely for a bigger piece of the estate, will get nothing. A disinherited child will have nothing to lose by contesting your decision, but if left a small amount they will be risking something – and may be more likely to cut their losses.
Disinheriting a child or other family member is a big decision and one that should be approached from a variety of angles. Consult an estate planning attorney to discuss your options, so that your estate is handled as you wish.