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Disinheriting a Loved One

Almost every family has one or two. They are the outliers or troublemakers in the family. Throughout their life, these troubling loved ones are often mooching off of you. They may already be literally living off of their inheritance. So how do you go about disinheriting a loved one? How do you ensure you are fair to your other heirs?

What happens without a plan?

Without an estate plan, you get no choice on the fairness of your asset distribution. Absent a plan, your heirs and what they recieve are determined by the interstate laws of California. These laws do not always reflect what you intended and would definitely not disinherit anyone. The rules state that at death, all your children would get your assets equally. There are no provisions for a person to exclude a child without a proper estate plan.

Should you draft an estate plan and disinherit someone, this may not go over well. In fact, if it’s a surprise, it could lead to litigation. The disinherited individual could argue that the person planning their estate had diminished capacity. This could lead to long, drawn out battle.

How can we reduce the risk of having an heir attack your wishes?

Communication is critical. The chances of accomplishing your intent improve should you communicate your desires clearly. This will go a long way to reduce litigation.

Another approach is to also put a no-contest clause within the estate plan. This would penalize an individual who tries to go against the plan’s wishes. In this situation, there must be some nominal inheritance provided so they fear losing it if they challenge the plan directives.

For instance, Kathy has $1 million and has three children, Jake, Janice, and Elaine. Janice causes all sorts of problems for Kathy and she chooses to disinherit Janice. Kathy decides to leave all her assets to Jake and Elaine. If Kathy were to take this approach, Janice would likely challenge it. Kathy may or may not win. However, if Kathy were to leave Janice a small inheritance, she may become concerned about losing that and choose not to challenge it.

Disinheriting a loved one can be an excruciating decision. Make sure you do it right and reduce the burden for you loved ones once you’ve passed away.

Filed under Estate Planning Tips

Estate Plan Keeping the Stepchildren in Mind

As divorces have increased over the past two decades, the need to protect stepchildren in an estate plan has proved critical. Without a proper plan, your child could be shortchanged or left in a bad situation like Cinderella.

On the other side of the equation, what if you become the primary parent for your spouse’s stepchildren? When you raise them, they often become your own child to you. However, the law doesn’t see it that way. Unless you adopt them, they are still not considered your child for inheritance purposes. This is why it’s important to write down your wishes within a proper estate plan.

What Could Go Wrong?

A simple example is the following. When Michael met Rachel, she had a newborn child, Susan. Michael and Rachel got married and raised Susan together. He never adopted Susan. Rachel died while Susan was a young adult. All of Rachel’s assets were left to Michael, who unfortunately died a few months later. This resulted in his estate going intestate (laws of the State). Per the law, his entire estate went to his siblings. Nothing went to Susan even though she was his daughter for all intent and purposes.

The situation could have been avoided. Michael could have created a clear estate plan. He could have also adopted Susan early on. Regardless, it’s never too early to start planning as you never know that something may happen to you.

Another cautionary notion is when the stepchild is young and their birth parent passes away. Without proper planning, the desire for the stepchild to be cared by their step-parent could be lost because the wishes of the birth parent aren’t made clear.

A stepchild or step-grandchild is a member of your family. The law differentiates between birth children and stepchildren so it is up to you to be clear on your wishes. Should you have questions about how to properly plan for your stepchildren reach out to John Lewman of Lewman Law.

Filed under Estate Planning Tips