It’s a mistake to disinherit a child only because 1. you cannot stand their spouse (your in-law); 2. they are having financial difficulty; 3. they are incapable of managing finances; or 4. they are being supported by a governmental program.
It’s wise to reconsider – think twice before disinheriting a loved one.
For instance, let us assume Donna, a widow, has five children: Ophelia, Grace, Janice, Jerry and Bob.
Ophelia is married to Frank. Donna has never liked or trusted him. Should Donna disinherit Ophelia only because she does not like Frank? She could.
She could also leave Ophelia’s share in a trust to be used for her benefit. If that trust were drawn properly, Donna could make sure that Frank will not directly benefit and that Ophelia would not easily squander the money.
Donna could also make sure that if Frank and Ophelia got divorced, Frank would get none of Donna’s money. In addition, Donna could direct that when Ophelia passes, what funds remain in Ophelia’s trust shall be given to her son, in trust, for his education.
Result: None of these plans ever really benefits Frank.
Grace is about to file for bankruptcy and she owes $250,000 to creditors. Should Donna disinherit Grace because she has creditors? She could.
She could also leave Grace’s share in a trust. Could Grace’s creditors take the money? Not if the trust is drawn properly.
Janice can’t handle money. She is a spendthrift. Should Donna disinherit Janice because she spends unwisely? She could.
She could also direct her share to be held in a trust for Janice’s benefit. Donna could create incentives so if Janice was gainfully employed, Donna could direct funds to be disbursed to match her income.
Or, better yet, Donna could direct that if Janice was gainfully employed and was maximizing her retirement contributions, then the trust would disburse funds equal to Janice’s pay. There are many possibilities that can help Janice.
Jerry and Bob both have disabilities and are currently benefitting from government programs. Should Donna disinherit Jerry and Bob in order to make sure they will not lose their government benefits? She could.
She could also leave their share in a supplemental needs trust for each of them. If the trust is drawn properly, it could provide funds for Jerry and Bob to supplement the benefits they are receiving.
In other words, if assets are left “in trust” (a special needs trust or supplemental needs trust) this can prevent your loved one from becoming ineligible for the benefits they get from the government. There is no need to disinherit them.
It is difficult enough to think about these things, but they are important. In all events, you should seek professional guidance in matters relative to your family property. Using trusts to shape beneficial interests and control use of funds and remainder interests, if done properly, can provide tremendous benefits for your family.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com