Should I disinherit my son or daughter?

This is a heartfelt question and there is no easy answers.  This article will explore techniques that can be used and alternatives that should be considered.  Here are some common questions:

1. What are the most effective ways to disinherit?
2. What if I am really only worried about the squandering of an inheritance?
3. Can I bypass my children and provide for my grandchildren?
4. Can I keep the inheritance away from my child’s spouse?
5. What if circumstances change and I want to change my mind?
6. What if one child needs the assets and the other doesn’t?

A son can bear with equanimity the loss of his father, but the loss of his inheritance may drive him to despair. Niccolo Machiavelli

What are the most effective ways to disinherit?

While there is no 100% foolproof plan there are several thing that can be done to prevent an heir from inheriting.  The most important thing to do is to have a plan.

1. Gifts:  They cannot inherit what isn’t there.  Giving property away to individuals or charities is a certain way to disinherit anyone.  Gifts, are hard to undo unless there undue influence, duress, etc. are shown.  Obviously, the problem with making a gift is the loss of control and potential gift tax liability.
2. Beneficiary Designations: These are often overlooked but IRAs, 401ks, bank accounts and even land can be held in a way that title passes automatically or with little paperwork by the persons or charities you designate.  Unlike a Will or a Trust property is not administered by an Executor or Trustee.  It can be a good way to transfer without other heirs knowledge.  Care must be taken so that these selections prevent you from making changes at a later time.  Joint tenancy, joint bank accounts and life estates should be avoided.  These techniques have serious limitations and should not be made without meaningful counseling.
3. Last Will and Testament: 
   1. A spouse cannot be disinherited in Oklahoma.  The spouse may elect against the Will and receive what he or she would have if no Will was made.
   2. Children can be disinherited.  However, there must be a clear intention to do so stated in the Will.  This is an often contested provision.  “No contest” clauses can be inserted which disinherits a child if they contest the share they receive.  Obviously, this is only effective if the child stands to lose a significant amount by contesting.
4. Family Trust:  The techniques for disinheriting with a Trust are similar to those with a Will.
5. Outlive them all:  Grouch Marx once said, “I plan to live forever, or die trying.”  Perhaps not the best plan.

What if I am really only worried about the squandering of an inheritance?

A Trust is a document that works like a Will but can do much more.  For those worried about children with the following problems:

• Drug and Alcohol Problems
• Immature or Naive
• Gambling or Foolish Spending
• Poor Money Management
• Children with Greedy Spouses
• Creditor Problems
• Lawsuit targets
• Children in need of Government Benefits

These are children that you do not necessarily wish to disinherit but the thought of unfettered access to your money will either harm them or be quickly wasted.  Trusts can be designed with Spendthrift provisions which can limit access to cash.  The Trustee in charge of the inheritance may instructed delay or deny distributions.  Conditions may be placed upon the distributions such as drug testing or completion of education.  The Trustee may also pay necessities directly.

Can I bypass my children and provide for my grandchildren?

Bypassing a child in favor of a grandchild is one technique.  This can be done with most of the strategies listed above.  However, it may be advisable to only do so in a structured Trust until the child reaches a certain level of maturity.  There may be tax consequences or benefits in do so.

Can I keep the inheritance away from my child’s spouse?

In Oklahoma inherited property remains the separate property of the heir unless it is co-mingled.  For example, if a child receives cash and deposits it into a joint bank account it loses its character as separate property.  Likewise real property can lose its separate character.  Strategies may be developed to let your child enjoy the property or income but then pass the property to someone else after they die.

What if circumstances change and I want to change my mind?

Flexibility is a key strategy.  That is why it is important to change title to property, such as using joint tenancy, to disinherit.  To change your mind would require cooperation by the joint tenant.  Beneficiary designation changes, amendments to Wills and Trusts can be made any time before your death.  Trusts provide limited powers by advisers to change how beneficiaries are paid.

What if one child needs the assets and the other doesn’t?

It is important that the reasoning be communicated so that the child who receives nothing or less does not develop resentments.  For some the provision for items with great sentimental or ancestral value can be given.

Summary

Estate Plans are not written in stone.

It is important that an your plan reflects your wishes.  To have no plan is to allow intestacy statutes to decide who inherits your property.  Therefore, it is best to have a plan.  If circumstances change in the future your plan may also change.  Amendments, codicils, new wills, restated trusts and beneficiary changes happen in the normal course as family dynamics or needs change.
Writing them out of the Will. How to disinherit a child.Richard Winblad