Attorney & Mediator
Attorney & Mediator

Should You Disinherit a Child?

Commonly, parents leave their estates equally to their children.  However, there are instances where parents intentionally choose to leave a child out.  There may be good reason for doing so.  One of the children is very successful and appears not to need any additional assets.  Another child is special needs and it is important to make certain they do not lose their government benefits.  There is the child who is financially irresponsible or may be drug-dependent.  Finally, there is the child who is estranged from the family.

Should these children be disinherited?  There are certainly arguments on both sides of this question.  It should be remembered that totally disinheriting a child will be permanent and can affect his or her relationship with siblings and other family members for a lifetime.   There is something symbolic about receiving something from a parent or grandparent’s estate that has nothing to do with the actual value of the asset.

Hurt feelings and slights are the real reason behind many painful and expensive court battles over inheritances.  Even if a lawsuit is not filed, siblings may be forever estranged. While in the end, after careful analysis, it may be decided that disinheriting is the appropriate option, it should be noted that there are other solutions.

The child who is financially successful today may have trouble in the future.  He or she could face financial ruin, or divorce.  Illness can financially wipe out a successful family. 

If a child is disinherited, so will his or her children.  If you are disinheriting a child, consideration should be made concerning the grandchildren.

Children who are physically, mentally or developmentally disabled may well be entitled to government benefits that would be at risk if they received an inheritance.  The alternative is to provide for this loved one with a special needs trust that will supplement but not interfere with government benefits, in much the same way as you would if you were alive.

The 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. Keep in mind that this child may need financial help now or in the future.  He or she may even become a responsible adult. Instead of disinheriting the child, you may want to establish a trust.  The trustee can be given discretion in providing or withholding financial assistance.  It is possible to stipulate conditions and requirements for the child to meet in order to receive distributions.

Choosing to disinherit a child – even if he or she has caused grief and heartache can send a message of no love, anger and resentment.  If you have previously disinherited a child and you have since reconciled, update your plan immediately.

If you have made the decision to disinherit a child, consider telling him or her of your decision and why.  In this way, it will not come as a complete surprise. Hopefully, by having this very difficult conversation, the child will not blame siblings later and it may eliminate an expensive court battle.

Personal Property – How to handle its distribution

The subject of personal property is an interesting one.  While it seems that large financial accounts would create more discord among siblings; it is the distribution of personal property that creates the long lasting rifts.

It is easy to divide money equally among a number of individuals – it’s a matter of simple math.   It is far more difficult to equitably divide personal property.  There is one set of grandma’s china, one antique leather chair from grandfather, several hunting rifles. How can this be divided equally among two or three children?  Should it be done by fair market value?  Should appraisals be obtained?  What if all children want the chair and none want the china?

For this reason, it is best to address the issue of personal property directly and in advance. 

First, ask your loved ones what it is they desire.  You may find that there are no disputes – they may all have their eyes on different items.  Get ready though – the things you think are so valuable may not be wanted by anyone.

Sentimental value is in the eye of the beholder.  Your emotional attachment to items of personal property in all likelihood are linked to your memories of the individual that owed the item – grandma’s china brings back images of Thanksgiving dinner around her table.  Your children may not have those same memories.  While they certainly respect their ancestors, they may only know them through photographs and stories.  They may not see grandmother’s sewing table as a treasured heirloom – but instead an item of old furniture that doesn’t fit with their lifestyle.

If there are disputes among children concerning the distribution of personal property – they all want the same items – then devise a plan for distribution.  Either decide ahead of time who gets which items and write it down, or come up with a method of having them select at the time of your death. 

Clients of mine have come up with several that I will share.

  • By birth order, or by drawing straws, have individuals select items in a round-robin method.  This places the burden on the child to decide whether they select the item with the most sentimental value to them, or of the greatest fair market value. 
  • Auction among the family is another popular method.  Each item is bid on by the family members.  The individual who bids the most, gets the item.  All the bid money goes into a pot and is then equally divided among the group at the end.  Those that want more personal property may actually have to pay and those that do not may actually receive money in the end.
  • Yard sale or auction to the public is another way of having the property distributed.  Each child has the same opportunity as the third parties present to purchase the items at fair market value.

 

Whatever method you decide upon, come up with a method for personal property distribution.  While you won’t be there to see the disagreements, you want to assure that the distribution of your treasures does not result in life-long disagreements among your children.

Asking the hard questions of aging parents

You have aging parents – but they are doing great right now.  Your concern is that you have no idea how to handle things in the future – you don’t know what they want. 

You have seen your friends confronted with these issues when a crises has occurred and it has created chaos and stress within the family.

If your parents are private people, how do you start this difficult conversation?

Pick a time when you are together with your parents, when everyone is relaxed and there are not a lot of distractions. 

Explain that you don’t know what their plans are for their future and as their children, you want to know how they would want to have things handled – you want to get it right – to honor their wishes.  You may actually find that your parents are relieved because they didn’t know how to get this conversation started. It is better to have this conversation now than at a time of crises.

  • Ask about their goals for their short term and long term future.  Have they considered their finances as they move forward?  Are there any concerns?
  •  How would they like things handled for them in the future?  What are their           concerns?  Why do they feel as they do? 
  • Do they have any estate planning documents?  If so, where are they located?  If not, discuss whether this might be a good time to investigate estate planning. 
  • Who are their professional advisors?  Financial advisor, accountant, insurance agents, attorney, doctors. 
  • What are their wishes for future living arrangements? Do they have long term care insurance?  Do they have sufficient financial security to stay in their own home? 
  • What are their funeral and/or burial wishes?  Do they have a prearrangement with a funeral home?  Do they have a prepaid funeral?

Stress the fact that you cannot help them and honor their wishes if you do not know what those goals, wishes and desires are.

Remember that this first conversation will be difficult for them and for you.  It may be a time to only break the ice.  There may be a need for future discussions.

Estate Planning for the Medical Professional

I am often surprised to find experienced, successful medical professionals who have no estate plan in place, or if they have one it is outdated.  Clearly, the stress and strain of their every day professional practices leave little time for this “back-burner” issue.  It is highly important – and it is time to move it to the front burner.

Medical Professionals (doctors, dentists, veterinarians, therapists) especially those with a private practice have unique issues that require an highly individualized approach.

One very important component is a comprehensive asset protection plan.  It is critical to evaluate the nature of the practice and its organization.  Additionally, special attention to ownership issues should be addressed.  It may be prudent to own the real estate in an L.L.C. which leases the property to the practice. The equipment may also be broken out into a separate company.  In this manner, the assets of the professional practice  can be protected from liability.

A thorough evaluation should be made of the medical professional’s retirement assets.  Also, the personal and/or marital assets should be structured for the maximum asset protection today and the appropriate transition in the future. 

High asset individuals such as doctors, dentists and veterinarians must determine how these assets would be managed and administered for their family in the event of their disability or death.  Trusts may be critical if there are children who are minors or young adults in order to provide for the appropriate distribution of assets for and to these children.

Since this planning requires a comprehensive approach, a team approach should be used including legal, accounting and financial professionals.

The important key is that this cannot stay a “back-burner” issue indefinitely.  It needs to be addressed and resolved.  Place these issues at the forefront and resolve to address these issues in the near future.