Disinheriting: An Extreme Step For Rare Occassions

One thing that can motivate people to create an estate plan is a desire to reduce or eliminate the share of their estates that some family members will receive relative to others. There can be lots of different reasons for disinheriting somebody. Some rooted in animosity — a desire to ensure that a family member that you don’t like doesn’t get any part of your estate. Others based on concern — not wanting a child struggling with a drug addiction to suddenly have access to thousands of dollars. Sometimes, it can even arise out of a desire to help — cutting a disabled child out of a will so that he or she doesn’t get disqualified from receiving government benefits.

Whatever the reason though, disinheriting a close family member is an extreme step that can have many unintended consequences, even when the decision seems justified and the motives pure. As this article from Bloomberg News illustrates, disinheriting should be treated as a deep fallback option, utilized only after you have considered other ways to accomplish your goals. There are almost certain to be at least a few. If you do think you want to disinherit a family member, consider the following issues.

Is disinheriting even an option?

If the person that you are trying to disinherit is your spouse, your state may have laws that prevent it. A lot of states require a certain portion of your estate to go to your spouse, regardless of what your will says. This often becomes an issue in two situations. First, when the deceased and his or her spouse were living separately from one another at the time of death, but hadn’t completed a divorce. Second, when the deceased was married at the time of death, but wanted his or her estate to go to kids from a prior relationship. If you want to cut a spouse out of your will, you probably either need to get that spouse’s written permission, divorce that spouse, or create a trust to disburse your assets in the way that you want.

Is disinheriting going to cause family strife?

Even if you have a bad relationship with certain family members, those family members still might get along with other family members that you don’t mean to punish. Disinheriting some family members while lavishly rewarding others is almost certainly going to at least lead to some awkward Thanksgiving encounters after you’re gone, if not worse. It may feel cathartic to imagine the looks on the faces of family members who you haven’t gotten along with when they realize that they aren’t getting anything, but you should also consider the awkward position into which you may be putting the family members who do receive your assets. Are they going to feel guilty every time they see their disinherited siblings? Worse yet, are they going to get sucked into litigation with their own family members? Disinheriting a close family member substantially increases the chance that your estate plan is going to get challenged in court. As the Bloomberg article notes, estate and trust litigation is a mushrooming industry. While litigation is never fun, it tends to be a particularly ugly, drawn out, and expensive experience when it’s not just money involved, but family emotions too.

Do you really know the financial situations of those who you are cutting out of your estate plan?

Sometimes, people decide to disinherit a child because they assume that the child doesn’t need the help, and maybe there are other children that do. That can be a dangerous assumption to make. Even if you’re right about your children’s financial situations at the time that you’re planning your estate, those situations may change dramatically in ways that you couldn’t possibly have foreseen after you’re gone.

If control really is needed, consider a trust

If your reason for disinheriting someone is based on a legitimate need for control — such as preventing a drug addict from receiving unfettered access to substantial funds or not wanting to disqualify a disabled child from receiving government benefits — consider setting up a trust instead. Trusts are flexible and often give you a way to accomplish your goals without the permanence that disinheriting someone entails.

If you do disinherit a family member, revisit that decision frequently

As bad as being disinherited can be, it’s worse if the decision was based on a situation that changed while the deceased was still alive. Finding out that your brothers and sisters are receiving money and gifts that you aren’t because of a drug problem that got solved or because of a frayed relationship that got mended can be a particularly bitter pill to swallow. If you do decide to disinherit a family member, it is critical that you reevaluate that decision frequently. You don’t want your loved ones’ last significant memory of you to be consumed with resentment about an oversight that would have been easy to fix.

Dan McKenzie
Dan McKenzie
dan@themckenziefirm.com

Dan specializes in estate planning, estate administration, and small business counsel. He opened the McKenzie Law Firm in 2013, after spending 10 years as a litigator, seeing what can happen when people fail to carefully identify and mitigate their risks. He is pleased to be raising four kids in the same state where he grew up.