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How to do Disinheritance Right

Disinheritance is a bit of an ugly subject for some. When planning your estate, it is important to remember that this is YOUR will and these are things that YOU have worked hard for. The point of a will or planning what to do with your estate is to make sure that it is divided the way that YOU see fit. If you do have to disinherit someone, here is how to do disinheritance right.

 

Fashion designer Oscar de la Renta died last year at age 82. He left one son, Moises de la Renta. He also left behind his second wife, Annette, and her three children

from a prior marriage.

One might expect Oscar to leave a substantial sum to his only son, Moises. However, Oscar chose to leave most of his $26 million estate to his second wife, Annette. Moises is one of the beneficiaries of a trust with less than 1/4 of his estate. The other beneficiaries of that trust are Annette and her three children. There is a “no contest” or “in terrorem” clause which completely disinherits Moises if he contests Ocsar’s will.

Oscar and Moises had a falling out a decade ago when Moises attempted to start his own fashion line. Oscar’s estate plan demonstrates the best way to disinherit someone.

First, you would include a “no contest” or “in terrorem” clause. Such a clause provides that, in the event of an unsuccessful legal challenge by that person, they receive nothing. (Note, such a clause is not valid in some states.) Some practitioners and clients simply choose this route. However, then there is no disincentive for a challenge to the plan. If the heir challenges unsuccessfully, they receive nothing. However, if they do not challenge, they also receive nothing. The second element of a successful disinheritance is a minor, but substantial inheritance. That way, if the heir challenges, they have something to lose.

In this case, if Moises challenges, he would no longer be a beneficiary regarding the trust with Vs of the estate. While being one of several beneficiaries of a trust with only 1/4 of the estate is far less than what his intestate share would be, he would have to think twice before risking that by challenging the plan.

Stephen C. Hartnett, J.D., LL.M.

Associate Director of Education
American Academy of Estate Planning Attorneys, Inc. 9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com

 

For assistance drafting your will, be sure to visit:
rdsmithlaw.com

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