Personal Planning Ideas

“Oops . . . I accidentally disinherited my son and two daughters.”

Many readers will recall the old “Brady Bunch” television series, in which a man and woman – each with three children from a prior marriage – became married to each other. Estate planning never came up in any of these episodes (it was a situation comedy, after all), but many second-marriage situations require careful estate planning to ensure that children from prior marriages are treated fairly.

Take the case of Henry. Henry was a widower for many years but recently remarried and now is living in retirement with his new wife, Judith. He has three adult children from his first marriage and Judith has two of her own. Henry is considering putting his house, bank accounts and stock portfolio into joint ownership with Judith, 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.

Henry’s attorneys pointed out that such a plan might “accidentally disinherit” his children. As much as Henry might trust Judith 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, Henry could direct that most or all of his estate go into a trust from which the trustee would pay Judith only the trust income for life, 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% 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.

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