Families are difficult. Tabloids are full of stories of affluent heirs who have proven incapable of managing their lives or their sudden access to inherited wealth.
Children maybe too young or emotionally immature to effectively manage the assets they received. In other situations, children have become dishonest, disreputable, estranged, or otherwise become undeserving of a full share of their parents’ assets.
Further, some parents simply prefer bequeathing their hard-earned assets to their church, charity, or other worthy cause. It can be a question of their values or their personal perspective of an inheritance’s effect upon its recipients.
For example, the popular singer Sting has six children who won’t be receiving any money after his death. He believes that it’s better for them to earn their own success: “I don’t want to leave them trust funds which will be albatrosses around their necks.”
For these and other reasons, parents may consider disinheriting one or more children from their estate. Although this decision can be emotionally fraught, it is a personal decision. It is essential for anyone contemplating this step to understand the legal process involved, especially under California law.
“Conventional wisdom” suggests that leaving a single dollar to an heir is a simple way to legally disinherit someone. This is not true, certainly not in California, where the rules are specific and complex. It is advisable to seek professional advice from an estate planning attorney under these circumstances. Below is an overview of the basic steps involved in disinheriting a child under California law.
Understand the Legal Framework
“Disinheriting” a child means a parent intentionally excludes them from their will or estate plan. This is legally permissible under California law. However, it’s important to note that if you don’t disinherit your child the “right way,” the child may still have a legal claim to their “elective share” of the estate. The elective share generally amounts to one-third of the parent’s estate.
Draft a Valid Will or Estate Plan
To effectively disinherit a child, it is critical to have a legally valid will or estate plan. Without these documents, California’s “intestacy” laws determine how your assets are distributed. Basically, intestacy means “dying without a will” or, more formally, “the condition of the estate of a person who dies without having in force a valid will or other binding declaration.”
Clearly State the Disinheritance
When drafting the will or estate plan, it is essential to specifically mention the child’s name and state your specific intent to disinherit them. The language must be clear, unambiguous, and legally sound. Vague language or omissions can lead to confusion and potential legal challenges.
Consider Including a No-Contest Clause
A “no-contest” or “in terrorem” clause (think of it as an heir’s “Roll the Dice” clause) are designed to deter legal challenges to the disinheritance. This type of clause states that if a beneficiary contests the will and loses, the penalty for losing their challenge is that they receive nothing from the estate. It forces the disinherited person to make an all-or-nothing gamble.
However, it’s important to note that no-contest clauses have limitations, and their effectiveness can vary. This is a strategic decision by the disinherited person who must balance (1) the size of the total estate, and size of the beneficiary’s potential inheritance, against (2) the likelihood of success in a lawsuit opposing the plan.
For example, “disinheriting” someone by bequeathing them $5000 might be sufficient disincentive in a small estate. However, even a $100,000 bequest might not be a sufficient deterrent to a disowned child who would receive one-third of a $100 million estate if they succeeded in persuading a judge to set aside the disinheritance.
These decisions are based on a variety of circumstances including the family dynamic, as well as the magnitude of the estate and the personality of the specific beneficiary.
Hiring third-party assistance here can be useful to impartially assess the situation from an objective viewpoint. Emotions will often come into play, and it can be extremely helpful to involve a neutral assistant or decision maker.
Update Your Beneficiary Designations
Disinheritance can extend beyond the will to other types of assets. The parent should review and update beneficiary designations on retirement accounts, life insurance policies, payable-on-death (POD) accounts, and other assets that transfer outside of the probate process. Ensuring these designations reflect your wishes will help avoid unintended consequences and potential conflicts.
Maintain Clear Documentation
Throughout the process, maintain detailed documentation of your decisions, discussions, and reasons for disinheriting the child. This documentation can be vital if any legal disputes arise after your passing. Your attorney can advise you on what records to keep and help ensure they are organized and accessible.
Conclusion
Needless to say, disinheritance involves complex legal and personal considerations and potential challenges. It is strongly advised to consult with an experienced estate planning attorney who can guide you through the process. They will provide personalized advice based on your specific circumstances and ensure compliance with all relevant legal requirements.