By
“Do it, and I’ll cut you out
of my will.”
That line, uttered in
countless movies and TV shows, makes it sound easy to disinherit a wayward
friend or relative—just write them out of your will. In reality, it isn’t
always that simple.
Even though your will
expresses your wishes about who inherits specific portions of your estate, limitations apply if you
want to omit certain relatives. And in any case, you need to take several steps
to ensure that your wishes are carried out.
Spouse’s rights
against disinheritance
If you would like to write
your spouse out of your will, you’re unlikely to be able to do so entirely.
Most states have what is called a spousal right of election.
Even if a will specifies
that a surviving spouse is to receive nothing, state law gives him or her the
right to take a certain amount of money and/or assets from the estate—this is
called an elective share. You can’t get around this by leaving your spouse $1
either. He or she has the right to the full amount specified by state law. The
amount is usually one-third of the estate, or one-half if there are no children
(each state is different, so check your state laws). The surviving spouse
claims the right of election during probate proceedings.
Disinheriting
children and grandchildren
You can leave a minor child
out of your will, but your estate will still be responsible for supporting that
child until adulthood. Adult children and grandchildren of any age can be
disinherited in a will if you wish to do so, but be sure to include a clause
that specifies you are leaving nothing (or a very tiny amount) to the relatives
you want to leave out, to clarify that your intent to leave the person nothing
is not an oversight.
Leaving a small token
inheritance may help deter the relative from contesting the will. It is also a good idea to
specifically say why you are
leaving a child out, or giving him or her a much smaller share. For
example, if one child is independently wealthy, you may feel that your other
children could use the money more. Explaining that can ease the sting.
Living trusts
provide protection
No matter how careful you are
in preparing your will, there is always the chance
that someone may contest it. It’s not easy to overturn a will, but it can be
done. Questions about competency, concerns about fraud or undue influence,
problems with the execution of the will, or ambiguous language can all result
in a will being completely or partially overturned.
The solution is to create a living trust. A revocable living trust
allows you to place your assets into the trust during your life (the trust will
own them going forward) and determine to whom they are distributed after your
death. You can continue to use your assets and spend your money as you normally
would, and you can cancel or change the trust at any time. The magic of it is
that a trust cannot be contested in probate court because trusts don’t go
through probate. (It is possible to bring a lawsuit against a living
trust, but it is much more difficult to do than to contest a will.) Even with a
living trust, however, your estate will be responsible for supporting your
minor children, and, in some states, the spousal right of election will apply
to the trust.
Distribute
during life
If you don’t want to deal with
wills or trusts, you can distribute your assets as gifts during your lifetime
to whomever you choose. Gifts aren’t restricted to cash; you can also transfer
title of real estate and ownership of accounts during your lifetime or give
away personal property.
Just keep in mind the gift and estate taxes. You have a lifetime
exclusion, currently $5,450,000, of assets that you can distribute as gifts
while you are alive or as bequests after you die. Exceed that amount and you’ll
be liable for either the gift or estate tax. (That $5,450,000 applies to the
total of gifts and bequests, so any portion of it you use for gifts while
you’re alive won’t be available to shield your assets from the estate tax after
you die.)
There is, however, also an
annual exclusion, currently $14,000, that you can distribute to any individual
without it counting against your lifetime exclusion. Moreover, you can use that
annual exclusion for any number of recipients. So, for example, if you have
five children and 15 grandchildren, you could give each of them $14,000 a year
without incurring the federal gift tax or eating into your lifetime gift and
estate tax exclusion.
It’s a lot to keep track of,
so consider your options carefully. Instead of cutting someone out of your
will, you may find that a gentler approach—airing your grievances and making
amends while you still can—is the better, more effective route in getting what
you want.
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