Avoiding Accidental Disinheritance
“Oops ... I accidentally disinherited my son and two daughters.” That’s a risk that may apply to many second-marriage situations. “Blended families” often require careful estate planning to ensure that spouses’ children from prior marriages are treated fairly.
Take the case of Jim: Jim was a widower for many years but recently remarried and now is living in retirement with his new wife, Marianne. He has three adult children from his first marriage and Marianne has two of her own. Jim is considering putting his house, bank accounts and stock portfolio into joint ownership with Marianne, and also naming her as new beneficiary of his life insurance and IRA, with the idea that she would distribute those assets from her estate plan, if she outlives him.
Jim’s attorneys pointed out that such a plan might “accidentally disinherit” his children. As much as Jim might trust Marianne to leave his assets to his children in her will, she may remarry after his death and leave everything to her new husband — or only to her children. Instead, Jim could direct that most or all of his estate go into a trust from which the trustee would pay Marianne only the trust income for life, and then distribute everything to his own children. The legal effect is that he can “lock in” his children as the beneficiaries of the trust when she dies, and with proper planning, everything in the trust will qualify for the 100 percent estate tax marital deduction at his death.
Other examples of accidental disinheritance might include selling or giving away an asset listed in your will, cashing in a life insurance policy, or spending all the funds in an IRA or other financial account that carries a beneficiary designation. The best way to eliminate “disinheritance” problems is to review and revise your estate plan periodically, paying attention to all the ways in which your assets may pass to beneficiaries.
Copyright © by R&R Newkirk. All rights reserved.
Take the case of Jim: Jim was a widower for many years but recently remarried and now is living in retirement with his new wife, Marianne. He has three adult children from his first marriage and Marianne has two of her own. Jim is considering putting his house, bank accounts and stock portfolio into joint ownership with Marianne, and also naming her as new beneficiary of his life insurance and IRA, with the idea that she would distribute those assets from her estate plan, if she outlives him.
Jim’s attorneys pointed out that such a plan might “accidentally disinherit” his children. As much as Jim might trust Marianne to leave his assets to his children in her will, she may remarry after his death and leave everything to her new husband — or only to her children. Instead, Jim could direct that most or all of his estate go into a trust from which the trustee would pay Marianne only the trust income for life, and then distribute everything to his own children. The legal effect is that he can “lock in” his children as the beneficiaries of the trust when she dies, and with proper planning, everything in the trust will qualify for the 100 percent estate tax marital deduction at his death.
Other examples of accidental disinheritance might include selling or giving away an asset listed in your will, cashing in a life insurance policy, or spending all the funds in an IRA or other financial account that carries a beneficiary designation. The best way to eliminate “disinheritance” problems is to review and revise your estate plan periodically, paying attention to all the ways in which your assets may pass to beneficiaries.
Copyright © by R&R Newkirk. All rights reserved.
