Families are complicated. No matter how well intentioned, virtually all family histories include some situations, dynamics, and incidents that cause immense disagreement, tension, stress, and frayed relationship. Virtually all families have some level of “dysfunction,” and no family is perfect.
Estate planning attorneys are acutely aware of this reality, as we worked with every manner of family on issues which must take into account their unique situations. Simply “splitting everything between the children” is not an ideal option for many. In certain cases parents have serious concerns about their child’s ability to manage an inheritance or the fairness of dividing things equally.
In the most extreme cases, some parents consider disinheriting a child altogether. This may be based on many different reasons: the child is estranged, they have significant means and do not need an inheritance, or perhaps they have drug and alcohol problems.
But is disinheritance the best option? Perhaps, but it should not be decided upon lightly. A planning professional can provide specific advice to discuss the pitfalls and ramifications of such a move.
A Bloomberg story from this month touched on the same topic, arguing that many parents who think that they want to cut their child out of their will may need to think twice.
The most obvious concern about cutting out a child is the door that it opens for subsequent litigation. As one professional interviewed for the story explained, “A good attorney will assume a will or trust will be contested. You do everything you can to cut off potential litigation in advance.”
A disinherited child may pursue legal redress. Even if it is unsuccessful it requires resources and delays a final resolution. But even if the party left out does not do anything, a disinheritance also places immense pressure on those who did receive an inheritance. For example, cutting out one child automatically creates a rift between those children left in and left out–even if that rift did not exist before. It is a template for family drama.
No matter what, it is prudent to at least learn about the alternatives available, like trusts for spendthrifts and “sprinkle” trusts. These legal tools may be able to more accurately address concerns without the need to completely disinherit a child. The spendthrift trust can structure the inheritance in such a way that it cannot be exposed to creditors and does not allow the child to blow through it all at once. A ‘sprinkle” trust may allow for an inheritance to be based on the child’s need down the road, to account for different financial situations for each child.