Should You Disinherit a Child?

Most parents choose to leave their estates equally to their children. But sometimes, parents intentionally choose to not leave anything to a child. There may be what the parents consider to be a legitimate reason: one child has been more financially successful than the others; not wanting a special needs child to lose government benefits; or not wanting to leave an inheritance to an irresponsible or drug-dependent child. Sometimes a parent wants to disinherit a child who is estranged from the family, or to use disinheritance as a way to get even and have the last word.

Regardless of the reason, disinheriting a child is hurtful, permanent, and will affect that child’s relationship with his or her siblings. The courts are full of siblings who sue each other over inheritances but even if they don’t sue, it is highly unlikely they will be having family dinners together. Money aside, there is symbolic meaning to receiving something from a parent’s estate. 

Disinheriting a child may be short-sighted and even completely unnecessary. For example:

• A child who appears to be more successful financially may have trouble behind the scenes. The inheritance may be needed now or in the future: finances can change, marriages can collapse, and people can become ill. And unless specific provision is made for them, grandchildren from this child will also be disinherited.
• A spouse, child, sibling, parent or other loved one who is physically, mentally or developmentally disabled—from birth, illness, injury or even substance abuse—may be entitled to government benefits now or in the future. Most of these benefits are available only to those with very minimal assets and income. But you do not have to disinherit this person. A special needs trust can be carefully designed to supplement and not jeopardize benefits provided by local, state, federal or private agencies.
• A child who is irresponsible with money or is under the influence of drugs or alcohol may not be the ideal candidate to receive an inheritance of any size. But this child may need financial help now or in the future, and may even become a responsible adult. Instead of disinheriting the child, establish a trust and give the trustee discretion in providing or withholding financial assistance; you can stipulate any requirements you want the child to meet.

How we choose to include our children in our estate plans says a good deal about our values and faith. Not disinheriting a child who has caused grief and heartache can convey a message of love and forgiveness, while disinheriting a child, even for what seems to be good cause, can convey a lack of love, anger and resentment.

If you have previously disinherited a child and you have since reconciled, update your plan immediately. If your decision to disinherit a child is final, your attorney will know the best way to handle it. Consider telling your child that you are disinheriting him or her so it doesn’t come as a complete surprise. Explaining your reasons will allow for honest discussion, may help deter the child from blaming siblings later and may prevent a costly court battle.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Why Does a Living Trust Cost More than a Will?

It will probably cost more initially to set up a well-drafted living trust than to have a will prepared. A true cost comparison should include not only the expense to establish the will or trust, but also what it will cost should you become incapacitated and after you die.

The Key Takeaways:

• A living trust document has more provisions than a will because it deals with issues while you are living and after you die, while a will only deals with issues that occur after your death.
• A properly prepared and funded living trust will avoid court proceedings at incapacity and death. A will provides no such protection and can, in fact, ensure court intervention at both events, which can be very costly (in time, privacy and dollars) to your family.

Instructions at Death and Incapacity

Both a will and a living trust contain instructions for distributing your assets after you die. But a living trust also contains your instructions for managing your assets and your care should you become incapacitated.

A Living Trust Avoids the Costs of Court Interference at Incapacity and Death

A properly prepared and funded living trust (one that holds all of your assets) will avoid the need for a court guardianship and/or conservatorship if you become incapacitated. The person(s) you select will be able to manage your care and your assets privately, with no court interference.

A will can only go into effect at your death, so it can provide no instructions regarding incapacity. In that case, your family would almost certainly have to ask the court to establish a guardianship and/or conservatorship for your care and your assets—a process that is public, time consuming, expensive and difficult to end.

What You Need to Know.  The same living trust document that can keep you out of a court guardianship at incapacity can also keep your family out of probate court when you die. But a will must go through probate. Depending on where you live, this can be costly and time consuming.

                                                        

Costs to Transfer Assets…Pay Now or Later

There may be some minor costs to transfer assets into your living trust when you set it up, and then from your trust to your beneficiaries after you die. But these will be minimal if you and your successor trustee do much of the work yourselves. With a will, the probate court (with its costs and attorney fees) is the only way to transfer your assets to your heirs after you die. So you can pay now to set up your trust and transfer titles, or you can pay the courts and attorneys to do this for you after you die.

Actions to Consider

• Find out what probate costs are where you live. If your state has a fee schedule based on the value of probate assets, this will be fairly easy. If it has “reasonable” fees, ask an attorney to estimate what these fees would be if you die tomorrow and, if you are married, if your spouse dies the next day.
• Similarly, ask your attorney to estimate what the costs would be if you become incapacitated tomorrow and, if you are married, if your spouse becomes incapacitated the next day. (Practically speaking, this will be impossible to estimate because no one will be able to predict how long the incapacity will last or what complications might arise. The mere uncertainty of these costs should give you pause—and propel you to plan for incapacity.)
• Add these estimates to the cost of having a will prepared—and compare that to the cost of a living trust. When you make a true comparison, you may conclude that having a living trust actually costs less than a will.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Organize Information for Your Family

Think for a few moments about what would happen if you suddenly became incapacitated or died. Would your spouse or family know what to do? Would they know where to find important records, assets and insurance documents? Would they be able to access (or even know about) online accounts or files on your computer? Would they know whom to ask if they need help?  Putting the effort in now to establish a formal document inventory can alleviate unnecessary anxiety and turmoil in the future.

The Key Takeaways

• If you should suddenly become incapacitated or die, your family would need to know where to find the information they would need.
• Let your key relationships know where to find your document inventory.
• Do not assume your process will be readily understood by others; have a trial run to make sure they can find and understand your records.
• Keep your inventory current with an annual review.

What Information Would They Need?

There is a large volume of documents and information that your family would need during a calamitous event such as incapacitation (even temporary) or death. This basic list will help you start thinking of the critical information you would want your family to have.

• legal documents (will, living trust, health care documents);
• list of medications you are taking;
• list of your advisors (attorney, CPA, banker, insurance agent, financial advisor, physicians);
• insurance policies (health and life);
• year-end bank and investment account statements;
• storage facility location, access method, and inventory;
• list of other assets, including location, account numbers, date purchased and purchase price;
• safe deposit box location, list of contents and location of key;
• list of people to whom you owe money (mortgage, credit cards, etc.);
• list of people who owe you money;
• death or disability benefits from organizations;
• past tax returns.

Also, many of your records are probably on a computer or stored online. If you scan documents or receive financial statements electronically, someone else may not even know they exist. If you use a computer accounting program such as Quicken, QuickBooks or Mint, those records would be on your computer. Family photos may be stored digitally or online. Much of this information is password protected.

What You Need to Know

Your document inventory requires a methodical listing of both hard copy and digital forms.  While the effort will be more challenging at the start, the maintenance of the inventory is much simpler.  Be mindful that your digital footprint will likely grow much faster in the future than it has in the past. 

Actions to Consider

• Give current copies of your health care documents to your physicians and designated agent(s). 
• Keep your original documents in one safe place, like a fireproof safe or safe deposit box. Make copies for the notebook described next.
• Buy one or two three-ring binders to organize your personal and financial information. You can enter it by hand or create spreadsheets on your computer, but having it all in one or two binders will make it easy for your family to find and use. (If you leave it on your computer, they may never find it.) Include locations, contact information, account numbers and amounts.
• Include a list of online accounts and how to access them (including passwords).
• Clean up your computer desktop and put important files in an easy-to-find desktop folder.
• Have a trial run. Ask your spouse or other family member (or your successor trustee or executor) to pretend that he or she needs to access needed information.
• At least once a year, review and update your notebook, computer desktop files and passwords for online accounts.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Philip Seymour Hoffman's Will: 3 Critical Mistakes

Oscar-winning actor Philip Seymour Hoffman died from a drug overdose in February 2014. Sadly, he left behind three young children - and a fortune estimated to be worth $35 million. 

He was only 46. 

After his death, Mr. Hoffman’s Last Will and Testament was filed for probate.  The Will is short – only 15 pages – and, it was signed on October 7, 2004, about a year and a half after the actor’s first child was born. 

The Will leaves his entire estate to Marianne “Mimi” O’Donnell, a costume designer and the mother of all three of Mr. Hoffman’s children.  The couple never married and had separated in 2013 (due to Mr. Hoffman’s recurring drug problems). 

Estate Planning Mistake #1 – Using a Will

Shortly after Mr. Hoffman’s Will was filed, The New York Post published it online and his final wishes instantly became public information.  We know his request to have his son (the only child living when the Will was signed) raised in Manhattan, Chicago, or San Francisco so that he "will be exposed to the culture, arts and architecture that such cities offer." 

There is another way – a private way.  A Revocable Living Trust (as used by Elizabeth Taylor and Paul Walker) would have kept Mr. Hoffman’s final wishes a private matter.

Estate Planning Mistake #2 – Failing to Update His Estate Plan

Mr. Hoffman signed his Will in October 2004.

• During the next nine years, he had two daughters, won an Oscar for best actor for his performance in Capote, and amassed the majority of his fortune. 
• Considering Mr. Hoffman's well-documented, long-term struggle with drug addiction as well as the significant changes in his life and net worth during those nine years, it is surprising that he failed to update his estate plan. 
• At the very least, your estate plan should be reviewed every few years to insure that it still does what you want it to do and takes into consideration changes in your finances, your family, and the law.  

 Estate Planning Mistake #3 – Ignoring a Trusted Advisor

In probate court documents filed in July, it was revealed that Mr. Hoffman’s accountant repeatedly advised him to protect his children with a trust fund.  But the actor ignored this good advice. 

With the terms of the old 2004 Will left unchanged, the estate will pass to Mr. Hoffman’s estranged girlfriend, outright and without any protections.

Nothing will go directly to his children. 

Had Mr. Hoffman listened to his accountant and worked with an estate planning attorney, he could have established a lasting legacy for his children, protecting them and their inheritances. 

With the counseling and advice of an experienced estate planning attorney, you can avoid mistakes like Mr. Hoffman’s.