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Disinheriting

Parental Warning: If You Own Your Property This Way, You May Accidentally Disinherit Your Own Children

Owning property as Joint Tenants with Right of Survivorship is easy, common, and often disastrous.  Sadly, children – both minor and adult – are often disinherited.

While there are several forms of joint ownership, the one most people use (and the one considered in this discussion) is called “Joint Ownership with Right of Survivorship.” When one owner dies, the jointly owned asset automatically, by operation of law, transfers to the surviving owner.

  • Joint ownership is a very common way for married people to own their assets.
  • Joint ownership is also commonly used by aging parents and their adult children.

Joint Ownership Just Postpones Probate

In most cases, joint ownership merely postpones probate; it doesn’t totally avoid it.  If the surviving owner does not add a new joint owner (or place the asset in trust) before she dies, the asset will have to go through probate before it can go to the heirs.  Or, if the owners die at the same time, probate is required immediately.

Joint Ownership Can Cause You to Unintentionally Disinherit Your Beloved Children

Surprising to most parents, assets titled as “Joint Tenants with Right of Survivorship” are NOT controlled by their Will or Trust.  In fact, if you are the first owner to die, you can’t control what happens to that asset.

  • If you add a spouse who is not the parent of all of your children as a joint owner, you will disinherit your children from a previous relationship.
  • If you add one child as a joint owner, you will disinherit your other children.

The transfer of ownership takes place immediately upon your death. Even if your Will or Trust directs that you want someone in particular to receive your share of a jointly owned asset, it will still go to the surviving owner.  The surviving owner can then do whatever he or she wants with the entire asset.

Here’s an example:

After Robert died, Joan owned their vacation home outright. She remarried a few years later, and she added her new spouse’s name to the title. When Joan died, her children were shocked to learn that the new husband now owned the property, even though their father had always promised it would stay in the family and go to the three of them.  

Other Risks of Joint Ownership

  • While it’s easy to add a co-owner’s name to a title, taking someone’s name off a title can be difficult. If the person does not agree, you could end up in court.
  • Your assets are exposed to the other owner’s debt and obligations. For example, if you add your adult son on the title of your home and he is successfully sued, you could be forced to sell your home.
  • There could be serious gift and/or income tax consequences.
  • If you add a minor as a joint owner, the only way to sell or refinance the asset is through a court guardianship.
  • If you need to sell or refinance and your co-owner is incapacitated and unable to conduct business, you’ll have to ask the court to appoint someone to sign for your co-owner (even if that co-owner is your spouse). Once the court gets involved, it usually stays involved to protect the incapacitated owner’s interest until the incapacity ends or the person dies.

Actions to Consider

  • To avoid both inconvenience and tragedy, call our office immediately to set up an appointment and have your asset ownership reviewed.
  • We will review your asset ownership and explain what will happen to your assets if you become disabled and when you die.
  • We will show you how to own your assets to best ensure your estate plan works, meaning it does what you think it’s going to do.

Joint ownership with a sibling, life partner, business partner, child, spouse, or anyone else, puts your assets and your children’s inheritance at risk.  It may cause significant and unnecessary taxes and cause your estate plan to fail.  To avoid both inconvenience and tragedy, you are invited to call our office right now.

The One Thing Every New Grandparent Must Do As Soon As Possible

Congratulations on welcoming the newest addition to your family.  Being a new grandparent changes everything — including how you approach your finances — and is one of the most joyous occasions in life.  The excitement of a new baby — and all of the firsts that come with this bundle of joy — can grab all of your attention and focus.  That being said, there is one thing that every new grandparent must do as soon as possible that is often overlooked.  Specifically, every new grandparent should immediately create (or revise) an estate plan so that it includes your family’s newest generation.

Estate Planning for Grandchildren

Having an intentional financial strategy for incorporating your new grandchild’s future in your overall estate plan is an important part in addressing your growing family’s needs.

Not having an estate plan can have unintended results for your surviving family members.  This is because intestacy — or your state’s applicable laws that determine who receives your assets upon your death if you have no estate plan — may not work the way you’d expect.  As a result, it can have disastrous results for grandparents who had other intentions or plans for their assets.  Instead of having the government decide who gets your asset when you die, now is the time to take control, while you can still put your wishes down on paper.

Failing to update an existing estate plan when a grandchild is born can be just as disastrous as intestacy.  While you may have contemplated the birth of grandchildren in your initial estate plan, you may not have put a mechanism in place to ensure your grandchild receives the maximum benefit you intended.  Likewise, failing to review or revise a beneficiary designation may inadvertently disinherit a grandchild.  A comprehensive trust with coordinated asset ownership is the best way to fully protect your multi-generational family.

Options for Grandparents

There are several ways to plan for your grandchildren’s future.  There are also different tools that may be used to incorporate this newer generation into an estate plan.

One way is to give the gift of education.  With college tuition rising every year for both private and public universities, setting aside money for your grandchild’s education is one way to plan for their future success.

Another way to provide for your grandchildren is by establishing a trust.  You can set aside a specific amount of money that can be used only for your minor grandchild’s benefit.  The child’s parent, or even grandparents themselves, can be listed as the custodians of the account.  As a custodian, the designated adult can make spending decisions on behalf of the minor child until he or she reaches the age of majority in his or her state of residence — or the age listed in the trust instrument.

To help ensure a successful future for your new grandchild, contact a knowledgeable estate planning attorney to learn about the options you have available so you can provide for this child’s future.

Call or contact us today.  We’re here to help.

The Perils of Promises… Marlon Brando’s Story

Legendary Oscar-winning actor Marlon Brando left the bulk of his estate (worth approximately $26 million) to his producer and other associates.

Brando created a valid last will and testament. However, he did not include his longtime housekeeper Angela Borlaza – who later sued alleging that Brando promised that she would inherit a home from him when he died.

A Promise Is A Promise…

While a promise is a promise, not all promises are legally equal.  In the courtroom, an oral promise is usually not treated the same as a written promise. In this case, Brando either never promised Borlaza anything or promised to give her the home, but never got around to putting it in his will (or in a written contract).  Borlaza claimed a promise about a home was made and sued his estate for $627,000.

However, the alleged promise was oral. The law generally favors written evidence when it comes to estate planning matters, so the court examined only what was written in Brando’s will on the assumption that he made all of his wishes known. Borlaza eventually settled the matter for $125,000, but she was lucky to get even that.

Oral promises about inheritances are typically not legally valid and usually only introduce confusion and uncertainty about formal estate planning documents (such as a will or trust). Courts can – and reasonably must – rely upon the documents, like a will, when probating an estate. Although you might be trying to save money or time by promising inheritances to family members, friends, or others, but you aren’t doing anyone a favor. Luckily, there is a way to make your promises and wishes legally valid.

Put It in Writing – The Key to Making Promises Work

Make sure that your loved ones receive everything you promised them by putting your wishes in writing through a last will and testament, a trust, or other estate planning tool. Don’t rest on your laurels. It is imperative to update your estate planning documents when any significant or life changing events occur such as:

  • a new oral promise you made to someone
  • adoption
  • birth
  • circumstance changes (change in health, wealth, or state of residence)
  • divorce
  • income changes
  • marriage
  • divorce
  • re-marriage

Need help putting your wishes in writing? You’re in the right place. Contact our office today and let us help you decide what type of estate plan might work best for your situation. It’s easier than you think and will give you the peace of mind that your loved ones aren’t forgotten.

Surprise! You Can’t Easily Disinherit Your Spouse in the U.S.

Believe it or not, in the U.S. it isn’t easy to disinherit your spouse.  But the same is not true for other family members – generally, you can use your estate plan to disinherit your brothers and sisters, your nieces and nephews, or even your very own children and grandchildren.

However, in the majority of states and the District of Columbia, you can’t intentionally disinherit your spouse unless your spouse actually agrees to receive nothing from your estate in a Prenuptial or Postnuptial Agreement.

Beware: Spousal Disinheritance Laws Vary Widely From State to State

Unfortunately there isn’t one set of rules that govern what a surviving spouse is entitled to inherit.  Instead, the laws governing spousal inheritance rights, referred to as “community property laws” or “elective share laws” depending on the state where you live or own property.  These laws vary widely:

  • In some states the surviving spouse’s right to inherit is based on how long the couple was married.
  • In some states the surviving spouse’s right to inherit is based on whether or not children were born of the marriage.
  • In some states the surviving spouse’s right to inherit is based on the value of assets included in the deceased spouse’s probate estate.
  • In some states the surviving spouse’s right to inherit is based on an “augmented estate” which includes the deceased spouse’s probate estate and non-probate assets.

For example, in Florida a surviving spouse has the option to receive a portion of their deceased spouse’s estate called the “elective share.”  This share is equal to 30% of the deceased spouse’s “elective estate,” which includes the value of the deceased spouse’s probate estate and certain non-probate assets such as payable on death and transfer on death accounts, joint accounts, the net cash surrender value of life insurance, property held in a revocable living trust, and annuities and other types of retirement accounts, reduced by the deceased spouse’s debts (this is an example of the last category described above).

Aside from this, state laws also vary widely regarding the time limit a surviving spouse has to seek their inheritance rights, which can range anywhere from a few months to a few years.

Disinherited Spouses Need to Act Quickly!

If your spouse has attempted to disinherit you, you must seek legal advice as soon as possible before state law bars you from enforcing your rights.  Only an experienced estate planning attorney can help you weigh all of your options and protect your interests as a surviving spouse.

Who’s Going to Get It: Do You Really Know the Beneficiaries of Your Dynasty Trust?

Today many estate plans contain irrevocable dynasty trusts that will continue for the benefit of a spouse’s lifetime and then for the benefit of several generations.  Since these trusts are designed to span multiple decades, it is important that they clearly define who will be included as trust beneficiaries at each generation.

Who Are Your Descendants?

In the past the definition of “descendant” was straightforward:  A person who can be traced back to a specific ancestor through the same blood lines.  But the modern family now encompasses much more than just blood heirs:

  • Adopted beneficiaries. In your trust, should the definition of “descendant” include a minor child who is legally adopted by your child, grandchild, or great grandchild?  What about an adult who is legally adopted by your child, grandchild, or great grandchild?  What happens if your child, grandchild or great grandchild gives up their naturally born child for adoption, should your blood heir who has been adopted away from your family be included as your descendant?  You should consider specifically including or excluding adopted minor and adult beneficiaries in the definition of “descendant” used in your trust agreement.
  • Stepchildren. In your trust, should the definition of “descendant” include a stepchild of your child, grandchild, or great grandchild who is never legally adopted by your heir but otherwise treated like one of their own?  While you may have the opportunity to get to know your stepchildren (and even your step grandchildren) and choose to specifically include them or exclude them in the definition of your descendants (in fact, you may want to include some and exclude others), it will be important to decide and communicate whether stepchildren in later generations should be included or excluded as beneficiaries of your trust.
  • Beneficiaries conceived using “assisted reproductive technology.” In your trust, should the definition of “descendant” include a child, grandchild or great grandchild conceived using artificial insemination?  What about a child, grandchild or great grandchild conceived using a surrogate mother?  What about a child, grandchild or great grandchild conceived using an anonymous sperm or egg donor?  While no one knows what the future definition of “assisted reproductive technology” will encompass, the definition of “descendant” in your trust agreement should specifically include or exclude heirs conceived using assisted reproductive technology.

Carefully Defining Your Trust Beneficiaries Will Keep Your Heirs Out of Court

Who may be your “descendant” twenty, thirty, or even fifty years into the future should be carefully considered when creating a trust that is intended to last for multiple generations.  Clearly defining the class of beneficiaries who will be entitled to receive distributions from your trust will allow for a smooth transition between generations and keep your heirs and trustees out of court.

If you have questions about the definition of “descendant” used in your trust or would like to discuss how you can clearly define your trust beneficiaries, please call our office.