In the first part of this article we discussed the idea that no one except a currently serving spouse has a legal right to an inheritance. If timed correctly a person can spend every last penny they have and (as an old joke goes) have their final check to the funeral home bounce for insufficient funds! But that is not a really good plan of action for anyone.
So assuming that there will be some funds available at the death of the client (or at the death of the surviving spouse for a married couple), and he/she does have a goal of providing an inheritance of some amount to family or others, we now address the issues of equality and fairness in the bequests.
What is unequal or unfair? In some cases, unequal is actually fairer, and I had a classic case of this with a client who had a son and a daughter. The son was a Wall Street wizard and made a ton of money. The daughter was a social worker and, as everyone knows, social workers do not have the same compensation scale as Wall Street wizards. They were both doing hard work, but the son was clearly in a different economic situation than the daughter. Providing equally from the client’s relatively modest estate would have been an unfair result. It would have had a minimal impact on the son’s finances and a significant impact on the daughter’s. We thought through that and they ultimately did a non-equal share arrangement, but they felt they needed to explain their reasoning to their children in their Trusts. I told them I thought it was pretty obvious to their children why they did what they did but if it made them more comfortable, that was fine. In their case this unequal distribution to their children was actually the fair result. But I have had other clients with similar situations and they went the other way where equal won out, even though equal was not going to be fair. Again, I’m the advisor. It’s their choice. I advised differently but it’s their choice, their money, their family.
There is an additional challenge in the case of an estranged child. I get asked the question “Do I have to provide for my daughter, who I haven’t seen in years and who’s very mean to me?” Of course, the answer is no, but you should address that child in your legal documents in an effort to avoid potential legal issues down the road. You don’t want them to believe they were forgotten, but you don’t have to say bad things about them, either. You can just say something like, “I’m not providing for my daughter, [Name], in my Will (or Trust), for reasons well known to her.” And nothing further is needed. You’ve identified her by name and by relationship and you’ve specified that she’s not going to receive anything under the Will or Trust. That’s all there is to it. You don’t have to give a detailed laundry list of explanation. In fact, it’s better not to. There’s a whole history of cases where there are people who felt they were maligned or slandered in Wills and they sued the Estates and in some cases, they win.
While a client may feel strongly about telling the child in some detail the reasons they were disinherited, there is no compelling reason to do that and it can cause more problems than it is worth. If you think back to the basic premise in Part One, if the child or other individual has no right or entitlement to anything, you certainly have the right to say they get nothing. But don’t forget them. List them in the document so they know that it wasn’t an oversight. It was deliberate, but the reasons for the disinheritance don’t have to be specified. A legal case tying up your Estate for many years impacts all of your named beneficiaries and airing your grievance in your Will or Trust is simply not worth it.
So to sum things up. Only a spouse, even one from whom you are legally separated, has a right to a claim against your Estate. No child or grandchild does, nor does a former spouse (unless the divorce decree says otherwise). Since they don’t have any right or entitlement to an inheritance you can spend every last penny or give your remaining funds to charity. But if you choose to provide for family you can do so in whatever fashion you want, equally, unequally, not at all, in a lump sum, in a continuing Trust, etc.
In the next article we will discuss a related topic—the ever popular what happens to our money when we have a “future ex-son-in-law” or “mean daughter-in-law who I hope becomes an ex” situation? Stay tuned!
Reilly Law PLC Can Help You Accomplish Your Planning Goals–Whatever They May Be
Reilly Law PLC specializes in estate planning and administration. We call what we do Peace of Mind Planning and one way for our clients to achieve Peace of Mind is to know that their planning will accomplish their goals, including goals of fairness or equality of estate bequests. To learn more or to schedule a consultation, visit us online or call us at 703-579-1936 today!