The holiday season is upon us. While many families will enjoy each other’s company amidst the festivities, there will be some who experience awkward moments or learn surprising facts about a loved one. In fact, this time of year can be quite character-revealing. Perhaps you will learn some new tidbits about certain relatives that cause you to second-guess certain estate planning decisions you have made. Have you ever joked about cutting someone out of your will? Would you ever consider such an action? Well, before you do anything drastic, consider the options.
Your first step is to fully examine the situation — is this serious or is it a mild instance caused by an evening of excess partying and overindulgence? Did you just learn that your son’s marriage was in great jeopardy, or did your daughter-in-law simply make a sarcastic remark that you happened to overhear? Did Miley enjoy a few too many glasses of egg nog and start twerking? Is Lindsay returning to rehab?
Next, other than a spouse and minor children, there is no one who is entitled to inherit anything from you. So you have every right to disinherit your adult “Miley,” whether or not issues exist. That said, if you would like a child to benefit from your estate, but they are not in a position to receive and enjoy it directly, there are various options to protect and preserve it.
The most common way to protect a beneficiary’s share of an inheritance involves the use of a trust. You can create a revocable living trust or include a trust inside your will. In either instrument, you can dictate the terms for Miley’s inheritance. Someone else — an individual or professional trustee — manages the funds until she reaches a more mature age (30? 40? 50?). Or maybe it’s not a matter of age, but a more serious concern about a child’s general ability to receive or manage the inheritance. An “inability” can include a pending divorce, creditor issues, substance abuse issues, or special needs, and the term of the trust may continue for a lifetime. The trust protects the inheritance from those outside influences or creditors for as long as the funds remain in the trust. The terms can outline how and when the trustee makes distributions. It allows you to retain some control over the inheritance, without the worry that it goes to some outside party (in either sense of that word).
While a trust may be a useful tool for protecting an inheritance, maybe Miley’s twerking incident really was the last straw for you. You are really set on cutting her out. What are your options? Well, unless Miley is your spouse or minor child, you can disinherit her by failing to provide for her in your estate plan. If she is your adult daughter or next-of-kin, you should consider how best to do this. In a probate situation (where the will is administered), certain parties are entitled to notice and offered the opportunity to object. So even if you do not include Miley as a beneficiary (i.e., “cut her out of the will”), she will have certain rights to notice and her “day in court” if she so chooses. Granted, she will need some grounds to contest (e.g., capacity, undue influence), but she can cause delays and add costs to the settlement of your estate.
Again, your primary option would be to create a revocable living trust in order to avoid probate. In that instance, Miley would have no automatic rights to notice or objection, and would have a more difficult path to challenging the trust instrument. As an alternative, you could elect to leave a smaller share to Miley, one that is less than her presumptive share, and include a provision that bars beneficiaries from contesting the will or trust. If she contests and loses on her claim, then she forfeits her share. While the successful use of a “no contest” clause is still undecided in Vermont, it may be enough to dissuade Miley from objecting to your estate plan.
In any event, don’t cut Miley out of your estate plan so hastily. Remember that the holidays can be stressful, and you should take some time to consider all your options.
Jennifer R. Luitjens is certified as an elder law attorney (CELA) by the National Elder Law Foundation, a nonprofit organization accredited by the ABA. She lives in Jericho and practices in South Burlington with the Jarrett Law Office. This article is for informational purposes only and is not intended to constitute comprehensive or specific legal advice. The author stresses the need to engage appropriate legal and financial professionals when devising your individual estate plan.