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Money June 2016

Legal Ease

One of the Most Common Concerns: Disinheriting Children

By Jonathan J. David

You are not legally obligated to leave anything to this child or any child for that matter. However, in order to avoid him contesting your will by claiming that he was left off accidently, you need to specifically disinherit him in the will, or if you are creating a trust to distribute your assets, then in the trust.

Dear Jonathan: Am I legally obligated to give all of my children a share of my estate when I die? I have four children and would like to leave my estate to just three of them. The fourth one I have not had a good relationship with for years and in my view he has already received his inheritance because I have given him so much money over the years. I want to make sure that when I pass away that this one son cannot cause problems for any of my other three children.

Jonathan Says: No, you are not legally obligated to leave anything to this child or any
child for that matter. However, in order to avoid him contesting your will by claiming that he was left off accidently, you need to specifically disinherit him in the will, or if you are creating a trust to distribute your assets, then in the trust. In other words, in the document you would identify him as your son, but then indicate that you are intentionally omitting him as a beneficiary. This way he cannot claim that he was meant to be included as a beneficiary but that you left him off accidently.

I would also take it one step further by telling him that you are not including him as a beneficiary of your estate because you feel he has already received his share of your estate from the money you have already given him, or for whatever other reasons you care to explain to him. This way he will not be surprised to find out he is disinherited and it might help avoid having him make a will challenge at that time. Further, it might help avoid the creation of tension and/or animosity between him and your other children if he is fully aware that this is your decision and your decision alone, and none of your other children influenced you to leave him off as a beneficiary.

I encourage you to meet with an estate planning attorney in your area to make sure that the documents are prepared properly so that your son cannot come back and successfully challenge your disinheriting him as a beneficiary. Good luck.

 

Dear Jonathan: I am getting ready to prepare my estate plan. I am a widower and I have three children. Two of my children are financially set and don’t need anything from me; my third child is irresponsible when it comes to finances and I have loaned this child money many times over the years. Having said that, my intent is to treat all three of my children equally, so each of them would get a one-third share of my estate. My other children, however, feel that I should reduce my one child’s share by the amount of loans I have made to him over his lifetime, otherwise he would actually be getting a larger portion of my estate than my other two children. They also think that I should leave his share in trust and not give it to him outright because he will blow it. They make some good points. What do you think?

Jonathan Says: The proposal your other two children made to you as to how to treat this son is not all that uncommon. Many parents will reduce a child’s overall share of their estate by the amount of loans that were made to that child during the parent’s lifetime. You can certainly adopt that philosophy, however, you also indicated in your question that your two other children are financially set and don’t really need the money, so it really comes down to what you (and not your other children) want to do regarding your son. What do you think is fair? There is no right or wrong answer.

As for retaining your son’s share in trust on his behalf, as opposed to distributing it to him outright, this might make sense if he is that bad with handling money, especially if the inheritance he will be receiving will be substantial. If you decide to go this route, however, you will need to determine whether the entire share is to be held back in trust, or just part of it, as well as when he will be entitled to receive distributions from the trust. Again, there is no right or wrong answer here.

I encourage you to discuss these questions with an estate planning attorney who can help you find answers that are fair and which you are comfortable with when determining how to provide for your son. Good luck.

 

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, PC, 1700 East Beltline, N.E., Grand Rapids, Michigan 49525.

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