How to Legally Disinherit Someone Using a Will or Trust

by | BiggerPockets.com

This article does not constitute legal advice. We recommend you seek the counsel of an attorney familiar with your specific situation and market to ensure you make the best decisions within your real estate business.

Sometimes, the apple falls very away from the tree. All sorts of circumstances can lead to wanting to disinherit an heir. Sometimes, they’re positive reasons. Maybe your son won the lottery and frankly won’t need the assets that could go instead to your daughter who works three jobs and lives paycheck to paycheck. More often, the circumstances are more sad. Emotional estrangement happens to the best of us. Maybe one of your heirs is a habitual substance abuser or alcoholic, and you just don’t want your inheritance to enable their slow-motion suicide. Because we love examples full of intrigue, we also can’t eliminate the possibility that you’ve discovered your wife has been the servant of a foreign government who only married you for cover. Perhaps you’ve uncovered her plot to murder you in your sleep and claim your fortune behind an oil painting. While divorce court might be the first step in that highly improbable case, you’re definitely going to want this information even if you don’t think your life will become a spy flick.

Whatever your reasoning, the good news is that you can easily disinherit the problematic heir from receiving anything in your estate! But first, let’s clear up the most common misconception about disinheriting someone.

Related: The 3 Most Common Mistakes People Make When Planning Their Estates

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How Not To Disinherit Your Child

You certainly shouldn’t just leave their name out of things and think that this will accomplish your goal of disinheriting them. The laws in most states will presume you intended to have as an heir unless you specifically state otherwise. Like all good estate planning, you want to leave clear instructions.

Following your spouse, your children are the presumed heirs to your estate by law (in the absence of an estate plan). As a result, it is important to include an entire list of your children in the estate plan and to specifically mention any child who will not be an heir to your estate by stating something like, “I do not want *child’s name here* to receive anything from my estate.” Please note that you may need to list anyone with a claim to your estate (for instance, if you’ve had a child outside of your marriage or a child that you haven’t seen in many years, this is something your attorney needs to know).  Natural children may be presumptive heirs even if you don’t have a relationship with them.

Options To Limit Inheritance Without Disinheriting

Perhaps you have a heart, and you still want to provide for that bad apple. But you also want to attach some strings to their inheritance. While you generally have freedom in deciding how to pass on your estate, there are some things you can’t do with a trust.

For example, a trust or will cannot be created and enforced if it goes against public policy, or promotes illegal activities or tortious acts. One of the more popularly requested clauses is one that requires a child to divorce their spouse in order for them to receive their inheritance. But that’s a no-go.

You can’t require your heirs to leave their spouses, even if the spouse is scummy or nutty. Here’s a clause that would be unenforceable, but people want to try it all the time: “Kim doesn’t get anything from the estate so long as she is married to that crazy Kanye West.” Many courts view this as a violation of public policy, as it promotes divorce. And you can’t ask her to have Kanye taken out so she becomes a widow either, because that’s a little thing called murder-for-hire, which is definitely a crime in every state in the Union. Contracts asking anyone to commit a crime are unenforceable in any legal setting.

Avoid clauses such as these, and seek the guidance of an attorney when adding clauses that disinherit or significantly restrict a child’s inheritance.

Using a Trust to Control and Limit Asset Distribution

There are ways to restrict inheritance using a trust. Let’s go back to that first example and say you have a son who is an alcoholic with a fondness for cocaine. You can have him provided for without totally disinheriting him. You can even incentivize attendance of a drug-treatment and rehabilitation program. The idea is, you can use your estate to encourage your son to recover from his addiction, or you can provide the bare minimum for him to get by. Common fixes here may include restricting the amount of money an heir can receive at a time or introducing a third party (such as your family lawyer) to distribute the wealth in their best interest. Again, with this type of sensitive situation, you want to have a good working relationship with an experienced estate-planning attorney. He or she can help you determine the best way to handle the situation.

Related: If You Inherited a House, You Could Inherited Its Problems Too!

Ensure Your Wishes Will Be Carried Out as Planned: Get Help From a Qualified Estate Planning Professional

Finally, we do recommend that you keep a copy of your most up-to-date will, and ensure that your attorney has one as well. This will make things nice and easy for your heirs, executor, and trustee. For more information on how executors and trustees work and what they do, see our previously featured Bigger Pockets article on the subject.

Whatever you do, don’t ever state why you’ve disinherited someone in your will or trust. If you do, chances are that they’ll use hired guns to prove that you were “mentally unstable” when you wrote that! Don’t explain yourself. First of all, it’s your money — so you don’t need to. But more importantly, you want to be abundantly clear that you’re completely lucid and making sound judgments. Use your own hired gun — that competent attorney we mentioned earlier — to ensure your wishes are carried out. Here’s hoping you don’t have to disinherit your loved ones. But if you do, you now know your options.

Have you ever disinherited a loved one?

What process did you use? Share your experience below!

About Author

Scott Smith

Scott Smith helps clients nationally and internationally from his office in Austin, Texas. With over 5 years experience in the litigation, Scott works on proactively building defense in anticipation of future lawsuits for real estate investors. Scott is one of the few attorneys in the nation that structures companies for maximum protection with minimum taxes.

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3 Comments

  1. Curt Smith

    Tnx Scott, I’ve taken a national speaker Dykes Boddiford’s estate class. And a GA Attorney who was in his class I’m using to write my Living Trust, $3k, including all the usual other docs in a full estate package.

    My Living trust is a full business with a manager that kicks in upon dual death that kicks in and starts continuing the running of our real estate business.

    What a lot of business owners do, Scott as I’m sure you sadly see too often, is they do a great job building a business but oddly/sadly completely fail at providing a session plan, and / or orderly upon death business operation plan. For me this is packaged in a Living Trust.

    For others: I moved all my taxible real estate into trusts, not for the usual reason (hiding) but to make it easy to change the beneficial interest should estate planning need me to change from the beneficiary being my pass through multimember LLC (me and my wife) to some other entity IE change the beneficiary to some other entity easily.

    At least folks here need to create a will!!! Make it pour over: And anything else not mentioned that we own will also pass to the heirs as mentioned above. IE one typically buys stuff after you do an initial writing of a will and then fail to update the will as new stuff is bought, or sold. Add a catch all phrase to pick up new assets.

    • Mary Browder

      You’re dead on Curt! I work for Scott and yes, we do see this a LOT. Even seasoned pros forget the estate planning basics like:
      * Updating the estate plan when you buy or sell a new major asset.
      * Secession plans, as mentioned above. This can be easily accomplished with a pour-over will/living trust. Since our clients are all RE investors, we really encourage this. It baffles me as just a legal writer the excuses people throw out for not having an estate plan. It’s something like 60% of Americans. I’ve heard everything from “not old enough,” “not rich enough,” to “not dying anytime soon” (as if anyone could know when they’re going to die!). I’ve had a medical durable power of attorney and Advance Directive since age 19. Before I even worked in the legal field–just because of a chronic medical condition. Heck, I may write about that on BP some day.
      * Not taking the taxman into account or planning ahead to have estate pay fees comes up a lot too. Really, this is usually related to failure of the individual to communicate with their heirs about their estate plan.

      I get that it’s an uncomfortable conversation. Really, I do. But the alternatives are so bleak. Thanks for sharing your own strategy–and rock on with that pour-over! None of us want to sentence our loved ones to the pain of probate court on top of the grieving process. Sounds like you’ve really got your stuff together. Bravo, and preach on! Thanks for your kind comments, too. I’m sure Scott will get back to you personally soon, but in case he doesn’t, just wanted to let you know we appreciate you reading and giving feedback!

    • Scott Smith

      That’s right Curt. As my team member said below, pour-over or bust if you’re a real estate investor planning to pass on your RE assets.

      And don’t forget to have your lawyer update your estate plan every time you buy or sell a major asset. It’s an important detail that even very experienced investors forget!

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