LEGAL ADVICE—Accidental Disinheritance

By on March 7, 2016
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By William B. Howell

 

What is this “accidental disinheritance”? Who gets accidentally disinherited? How does this work? Does it really happen? Is my family in danger? Maybe. Let me explain.

You probably want your assets to go to your children when you are no longer here. Not to your son-in-law or daughter-in-law, but to your child. And if that child should predecease you, then you would likely want the portion that would have gone to that deceased child to go to your grandchildren, that is, the children of that deceased child. But it doesn’t always work out that way, regardless of how much you want things to go your way. It has to be in writing and it has to be in the proper form. Otherwise, your desires will be ignored.

For an example of this type process, assume you have a son named John, he is married to Mary and they have a child Jimmy. Your will leaves everything to John, but he is not living when you pass. So what happens then? It can go where John’s estate plan left it (not where you wanted it to go), and that is often the surviving spouse, Mary, your daughter-in-law. Now, can Mary get remarried and share your money with her new husband? Sure she can. If Mary passes away, does the money she got from you go to your grandson Jimmy? Maybe, or maybe not. Depends on what Mary’s will says; it could all go to Mary’s new husband, leaving Jimmy “accidentally disinherited.”

Another situation: there are children from the first marriage and then there is a second marriage. Both spouses have children from the prior marriage. Most husbands and wives (first or second or whatever) after a while own their assets together, and often it is as joint tenants with rights of survivorship. This can include the home, the bank account, investment accounts and so forth. Each spouse makes the other the beneficiary on their retirement accounts and life insurance. Then one spouse passes away. Where do the assets go? To the surviving spouse, of course. Then what happens to the assets when the surviving spouse passes away? They go to the children of the surviving spouse in most cases, and the children of the first spouse to die got “accidentally disinherited.”

It doesn’t have to be that way. Instead, the husband and wife could have each used a well written Living Trust to allow the surviving spouse (they don’t yet know which of them it will be) to use and benefit from the assets during the lifetime of that surviving spouse, but, at the death of the surviving spouse, then all the remaining assets in the Living Trust of the first spouse to pass away would be distributed to that spouse’s children; or if the husband and wife had a joint trust, the assets would be divided among the children of both spouses in whatever way the spouses chose, but not to the children of the surviving spouse alone.

If you have a second marriage and have children from your prior marriage, then take a little of your time to seek out some professional advice to help you decide how you are going to prevent the heartbreak that can result from your children being left out after you are gone, particularly if you should go before your spouse. And this can be accomplished and still allow your spouse to benefit from your assets as well.

But like all planning for incapacity or death, it must be done in advance. When the time comes that you need the plan to be carried out, it is too late to then address the problem.