- August 4, 2016
Over the next 30 years, it is estimated that a whopping $30 trillion — yes, trillion — will pass under Wills and trusts from Baby Boomers to their children, grandchildren, and charities. For descendants who have been disinherited, or believe they have not received their fair share, this means there will be a lot of money to fight over. Before disinheriting a child or reducing their share of benefits, you should carefully consider whether you should do it at all, and if you do, whether you should explain your reasoning in your Will and trust.
Inheritance disputes are as old as the Book of Genesis (Jacob and Esau) and appear to be on the rise. So too are claims that a parent did not know what he or she was doing (lack of mental capacity) when he or she disinherited a child or reduced their benefits, or was improperly manipulated by someone and unable to exercise free will (undue influence).
There is a presumption that parents intend to provide for their children upon their deaths. Intestacy laws are founded upon that presumption. For example, in the event you die without a Will, intestacy laws provide that your assets will pass to your children and spouse, or as estate planners say, “the natural objects of your bounty.” While disinheritance runs counter to the presumption that parents intend to provide for their children, every state of the Union, except Louisiana, allows you to disinherit your children, or provide different benefits among them, so long as you do so under a written Will or trust while you are competent and free of undue influence.
Disinheriting a child, or reducing their benefits, often occurs for good reason. For example, parents may have provided one child with more benefits over the years (professional school tuition or a down payment on a house) and want to reduce benefits to that child to equalize the assets among all their children. There are also parents, like Warren Buffett, who are opposed to “dynastic wealth.” Buffett, for example, has pledged to give away 99% of his estate to charity and has encouraged other billionaires to follow his lead under The Giving Pledge. And then there are situations where the parents and child have become estranged and simply have no relationship, or where the child has a substance abuse problem which the parents are fearful of funding.
The first question to consider before disinheriting a child or reducing his or her benefits is whether you should do it at all due to the fact that there are other options. For example, if your child has a substance abuse issue, you could establish a trust under which he or she is eligible for distributions only upon successfully attending drug counseling and passing periodic drug testing. If you want distributions to your children to be based on their needs by taking their financial status into consideration, you could opt for a trust under which the trustee will make those decisions after you pass.
If you are estranged from your child, you could consider using an “in terrorem” provision, a provision used in a Will or trust in which money or other assets are given to a beneficiary, but only on the condition that the beneficiary does not sue to upset the provisions of the Will or trust. If the beneficiary challenges the Will or trust in court, then he or she forfeits the bequest. While courts carefully scrutinize “in terrorem” provisions, we have found them to be effective to dissuade a beneficiary from challenging a Will or trust so long as the amount of the bequest is large enough that a beneficiary would think twice about challenging the Will or trust to try to get more funds.
If the reason for disinheritance is that you are estranged from your child, you need to consider whether there is any hope of reconciliation. While it is true that you can always change your Will or revocable trust if reconciliation were to occur, life — and death — often gets in the way. An unexpected death, or the onset of dementia, will prevent you from undoing the disinheritance.
An American writer, Mary Beth Caschetta, had a very poor relationship with her conservative father in the 1990s. Her father was a staunch conservative and initially unable to accept the fact that his daughter was a progressive gay woman. His view changed over the years and by the time of his sudden death in 2009, he had reconciled with his daughter. Unfortunately, he never changed the Will he wrote in 2000 in which he disinherited his daughter. In his Will, Mary Beth’s father adopted the same language Joan Crawford used to disinherit her daughter: “I leave no bequest to my daughter for reasons known to her.”
Mary Beth was deeply disappointed and hurt over being disinherited, but she did not litigate over her disinheritance and did not harbor long-term bitterness, as demonstrated by a heartfelt article she wrote about the experience. Joan Crawford’s reputation, on the other hand, did not fare as well. A couple of years after disinheriting her daughter Christina, her daughter wrote one of the first tell-all celebrity memoirs called “Mommie Dearest,” where we learned that Joan was a cruel, abusive alcoholic who really did not like wire clothes hangers.
If after careful thought you want to disinherit a child, or reduce their benefits, the next question to ask is whether you should explain why in your Will and trust. On this point, many estate planners like to keep the Wills and trusts they draft silent. Several articles by estate planners advise that Wills and trusts should only state that a child has been disinherited and not explain why. They believe explaining why could be used against the parent. For example, if a parent explains the disinheritance occurred because the child failed to visit, but the facts demonstrate otherwise, the disinherited child could use the explanation to argue that the parent lacked capacity to disinherit them and seek to have the Will or trust invalidated.
My concern with that approach is that it is a hypothetical that would not likely happen in the real world. If a parent, in fact, did not know whether her children visited her, she should not be amending her estate plan, and it is doubtful that an experienced and ethical attorney would draft such an amendment. Moreover, if a parent was unaware of visits by her children, there would likely be a number of additional examples to show she lacked mental capacity.
From my perspective as a litigator, I believe that in most cases it would be quite helpful to have an explanation of why you disinherited your child or reduced his or her benefits within the Will and trust itself. First, it gives you an opportunity to essentially testify in court after you have passed, which could be very powerful. If your reasoning is sound and not against public policy, the Judge may not only have a better understanding of your intent, but perhaps be in a better position to honor it over claims made by your children.
Second, in the event you have not discussed the details of your estate plan with your children, explaining why you made the decisions in your Will and trust could possibly persuade them not to litigate over it. That appears to be the approach taken by the late Henry Fonda. He disinherited his daughter Jane and son Peter because he felt they were financially secure and did not need his money, but he did include a bequest for his then wife and third child, Amy. In a short paragraph Henry Fonda explained his reasoning as follows:
THIRD: I am providing primarily for my wife Shirlee and my daughter Amy because they are dependent upon me for their support. I have made no provision in this Will for Jane or Peter, or their families, solely because in my opinion they are financially independent, and my decision is not in any sense a measure of my deep affection for them.
Neither Jane Fonda, nor her brother Peter, challenged their disinheritance. While there is no guarantee that including an explanation in your Will and trust will prevent litigation after your death, I believe that an elegant explanation as to why you chose to disinherit or reduce benefits is preferred to providing no explanation at all.
For more information on this topic, please contact Gerry Ring at firstname.lastname@example.org or 312/840-7014.