Why you might want to disinherit your kids

[socca]

And for heaven's sake, as the author says, don't put family members in-between other family member's money (that they think is "theirs") and the other family members. Disaster waiting to happen.

As sole executor of my mother's estate, I'm standing between my step-brothers and a large inheritance thanks to a QTIP trust set up by my step-father (hopefully mom will live to a ripe old age; she's late 70's now). Am I worried that my step-brothers will lawyer-up when it comes time to settle her estate? Only a little. Both my step-father's trust and my mother's trust contain a clause that automatically disinherits any beneficiary who challenges trust administration. Will this be enough to discourage conflict? Only time will tell.

 

[Blue Collar Guy]

As sole executor of my mother's estate, I'm standing between my step-brothers and a large inheritance thanks to a QTIP trust set up by my step-father (hopefully mom will live to a ripe old age; she's late 70's now). Am I worried that my step-brothers will lawyer-up when it comes time to settle her estate? Only a little. Both my step-father's trust and my mother's trust contain a clause that automatically disinherits any beneficiary who challenges trust administration. Will this be enough to discourage conflict? Only time will tell.

Im going to take a shot in the dark here. Can one infer that your step father has left you the lions share of the trust after your mom passes? Im also thinking that since you used the words"large inheritance" that unless they are getting a nice slice of the trust you can bet they will lawyer up. As far as the no challenge clause, unless its frivolous, the court wont enforce it. I know this last bit of info from one of my friends who married money. They are going thru it now.

 

[Fedup]

Interesting. I have the same clause in my trust. You mean it's a NOP, an acronym stands for doing nothing in computer programming.

 

[CaliKid]

No contest clauses are important as they do stop some contests since people are scared to risk triggering it. Each state has different laws on no contest clauses. People definitely have to be careful to not trigger the no contest clause by contesting. What is "contesting" will depend on state law and the words of the document. There are some actions that might seem like a contest that are not and this is for good reason. For example, if a person changes their will when they are 102 years old shouldn't a person be able to petition the court if they feel the person who made the changes late in life was not mentally competent. This might be allowed and not be a contest. Another common one is asking questions, or actually filing a petition in court to contest an accounting. That is not a contest generally as you are contesting the accounting rather than the decedent's document. Also, it's not automatic as someone suggested above. It generally requires some type of action to be filed in the court and probably a Judge declaring the no contest clause was triggered.

 

[socca]

Also, it's not automatic as someone suggested above. It generally requires some type of action to be filed in the court and probably a Judge declaring the no contest clause was triggered.

My step-father's QTIP trust gives my mother the power to disinherit any of my step-brothers for any reason. Compared to this, the 'no contest' clause seems 'automatic'. If, as executor of my mother's estate, I try to use the 'no contest' clause to disinherit one of my step-brothers, it's not clear why I would need to get the court system involved. Of course, the disinherited step-brother would probably sue me over the application of this clause, so the whole mess would land in the court system anyway. In any case, I would get the advice of a lawyer before proceeding. As you point out, the main value of the clause may be as a psychological deterrent.

 

[athena53]

I could never consider anything other than an even split myself regardless of circumstance. My parents make it clear they would not either. I cannot believe anything less would be fair. Why punish the wise.

I've got only one son and no other obvious heirs (siblings all doing well on their own) but I could see leaving a bigger share based on need to a child who's in an honorable but low-paying profession (e.g. social work) or who had a bad setback in life such as a messy divorce that required them to start over, or maybe even one who didn't have the marketable skills the others did and was never able to get into a well-paying job. I'd want to discuss this with them beforehand so it wasn't a surprise.

 

[splitwdw]

We have no children but I don't understand the attitude "leave more to a child that isn't doing as well as their siblings". I would feel like you are playing favorites and you probably favored this child all along. My husband and I are making my nieces and nephews our heirs. All of them are still in school and whatever job they end up with will be "honorable".

 

[garyt]

My wife and I tell our parents on both sides not to save anything for us, have fun spending your money. We're all fine on our own.

 

[Dancfo]

My previous comment of, "And for heaven's sake, as the author says, don't put family members in-between other family member's money (that they think is "theirs") and the other family members. Disaster waiting to happen." is based more on my observations of family dynamics vs. being sued or having legal issues. Of course, there are plenty of situations and families that are harmonious and can move through this process with no problems.

On the other hand, there are multiple situations where even the best intentions are not sufficient, and deep, permanent family discord is the result. Perhaps it can be thought of as just being careful, like wearing a seat belt or buying insurance. Most of the time things will be fine, but when they're not, they can be really bad.

 

[growing_older]

"And for heaven's sake, as the author says, don't put family members in-between other family member's money (that they think is "theirs") and the other family members. Disaster waiting to happen." is based more on my observations of family dynamics vs. being sued or having legal issues.

If one child is named as trustee for the trust, with power to grant or deny requests for support from the trust (a very common arrangement) then even if the intent of the trust is equal distribution, the children who must ask often grow resentful. The trustee may be trying to make the trust last for the benefit of a next generation, but those who want to spend now just want "their" money as soon as possible. A surefire recipe for family discord and acrimony.

 

[marko]

I grew up around a lot of kids who were trust fund babies and/or in line for big inheritances.
Some ended up just fine, some ended up disasters (or dead) as a result.
The money only seemed to magnify their strengths or weaknesses.

 

[youbet]

I grew up around a lot of kids who were trust fund babies and/or in line for big inheritances.
Some ended up just fine, some ended up disasters (or dead) as a result.
The money only seemed to magnify their strengths or weaknesses.

I grew up poor in the inner city and knew absolutely no one with any appreciable wealth or lined up for big inheritances.

Some ended up just fine, some ended up disasters (or dead) as a result.
The lack of money only seemed to magnify their strengths or weaknesses.

 

[marko]

I grew up poor in the inner city and knew absolutely no one with any appreciable wealth or lined up for big inheritances.

Some ended up just fine, some ended up disasters (or dead) as a result.
The lack of money only seemed to magnify their strengths or weaknesses.

Exactly!

 

[Out of Steam]

In the late 70s, I saw a childhood friend go through a roughly $100K inheritance he received shortly after turning 18.

This was a very substantial inheritance at the time, basically spent on alcohol and drugs.

 

[CaliKid]

My step-father's QTIP trust gives my mother the power to disinherit any of my step-brothers for any reason. Compared to this, the 'no contest' clause seems 'automatic'. If, as executor of my mother's estate, I try to use the 'no contest' clause to disinherit one of my step-brothers, it's not clear why I would need to get the court system involved. Of course, the disinherited step-brother would probably sue me over the application of this clause, so the whole mess would land in the court system anyway. In any case, I would get the advice of a lawyer before proceeding. As you point out, the main value of the clause may be as a psychological deterrent.

That sounds like an unusual clause for a QTIP trust.

If you try to enforce a no contest clause without a Judge's signature on a court order I suspect you will be sued. Just a hunch.

 

[6miths]

How about what this Michigan lumber baron did, he split it among heirs, 21 years after the last grandchild died.


Millionaire's heirs get inheritance after 92 yrs - CBS News

Must have been invested pretty badly or the lawyers and trustees must have loved it.

He died in 1919. He was once among the eight wealthiest Americans. And there were some incredibly wealthy Americans at that point, including the most wealthy of all time in Rockefeller.

Annualized S&P 500 return is 10.3% and DJIA is 10%. To get an estate of 110 million one would only have had to put 4,000 dollars into the equivalent investments...

 

[Blue Collar Guy]

Must have been invested pretty badly or the lawyers and trustees must have loved it.

He died in 1919. He was once among the eight wealthiest Americans. And there were some incredibly wealthy Americans at that point, including the most wealthy of all time in Rockefeller.

Annualized S&P 500 return is 10.3% and DJIA is 10%. To get an estate of 110 million one would only have had to put 4,000 dollars into the equivalent investments...

Maybe he hired my former investment adviser.

 

[Sunset]

In the late 70s, I saw a childhood friend go through a roughly $100K inheritance he received shortly after turning 18.

This was a very substantial inheritance at the time, basically spent on alcohol and drugs.

Hey, you must know my Cousin - same story - but maybe it's just a common occurrence

 

[Dancfo]

My step-father's QTIP trust gives my mother the power to disinherit any of my step-brothers for any reason. Compared to this, the 'no contest' clause seems 'automatic'. If, as executor of my mother's estate, I try to use the 'no contest' clause to disinherit one of my step-brothers, it's not clear why I would need to get the court system involved. Of course, the disinherited step-brother would probably sue me over the application of this clause, so the whole mess would land in the court system anyway. In any case, I would get the advice of a lawyer before proceeding. As you point out, the main value of the clause may be as a psychological deterrent.

That sounds like an unusual clause for a QTIP trust.

If you try to enforce a no contest clause without a Judge's signature on a court order I suspect you will be sued. Just a hunch.

Perhaps mom has a limited power of appointment over the remainders, giving her the ability to decide within the limited class. Of course, this is much different than a "no contest clause." Agree that making a decision of cutting someone out through a no-contest clause should be blessed by the court - because you're going there anyway. Also, just to point out since we're talking about getting sued, as a fiduciary, you are "never" excused for a breach of your duties, and can generally still get in trouble for actions deemed as "gross negligence", "wanton disregard", and the like - regardless of the trust language.

 

[RunningBum]

Must have been invested pretty badly or the lawyers and trustees must have loved it.

He died in 1919. He was once among the eight wealthiest Americans. And there were some incredibly wealthy Americans at that point, including the most wealthy of all time in Rockefeller.

Annualized S&P 500 return is 10.3% and DJIA is 10%. To get an estate of 110 million one would only have had to put 4,000 dollars into the equivalent investments...

You're right, that's a horrible return on his estimated $40-90M. He did give annuities to most of his kids and some of his staff, but they ranged from $1K-30K for a favored son. Probably not more than $100K a year, while they lived.

So what was the trust invested in? I found this at Mid-Michigan Remembers

All of his money was put into an account at Second National Bank and was not to be distributed until twenty-one years after the last survivors of his two grandchildren died

So the money sat in a bank, probably getting a low but safe return, while most likely getting charged a nice fee for managing it. Early on that would include disbursing those annuities, but later it was just keeping track of the heirs as those living died off, and new candidates were born. Or maybe they just assumed the heirs would contact them, and they just had to validate.

 

[Blue Collar Guy]

I dont believe fair always means equal with regard to inheritances.

 

[Danmar]

I dont believe fair always means equal with regard to inheritances.

I agree. But I think it depends on the reason for "non equality". My parents in law decided to give more to DW's brother than her and her sister. Reason was the fact my brother in law is married to someone with Parkinson's which will require expensive care over the years. We are perfectly OK with that, and in fact suggested it in the first place.

Another case relates to very good friends, where his father has decided to give most of his residual wealth to one daughter because she "she hasn't done as well" as her sibs. A little harder to support this decision.

Both cases have generated some resentment though.

 

[samclem]

Another case relates to very good friends, where his father has decided to give most of his residual wealth to one daughter because she "she hasn't done as well" as her sibs. A little harder to support this decision.

Both cases have generated some resentment though.

Why? Do the other siblings think their parents "owe" them their money--or maybe that the money is almost theirs already, the old folks can just use a little while they are still hanging around?

When I hear things like this, I wonder if these "expectant inheritors" also resent money that their folks give to charity, while they are alive or after they die. If they think it is bad that their own sis got money to help make her rent payment or so her kids can attend college, I can only imagine how they feel when total strangers are benefiting from Mom and Dad's money.

 

[Mdlerth]

I agree. But I think it depends on the reason for "non equality". My parents in law decided to give more to DW's brother than her and her sister. Reason was the fact my brother in law is married to someone with Parkinson's which will require expensive care over the years. We are perfectly OK with that, and in fact suggested it in the first place.

Another case relates to very good friends, where his father has decided to give most of his residual wealth to one daughter because she "she hasn't done as well" as her sibs. A little harder to support this decision.

Both cases have generated some resentment though.

This makes me wonder about my own character. When my parents punch out (they are "on the clock" now), it would make perfect sense if they were to leave all their assets to my two sisters. I don't need anything, while both girls are struggling.

But would I secretly, silently harbor any negative feelings? "Mom and Dad always did like them best, while Cindermdlerth had to sleep in the cellar and never got to go to the ball."

I don't know, but I suspect I will find out in a few months.

 

[Danmar]

The resentment comes from a greedy (in my view) sister in law.

In the second case the father outlived the mother and changed the will that they had agreed on from an equal distribution to an unequal one. There is some suspicion that the daughter who is getting the money, actively campaigned for it. I don't have a view on that one really. Not that much money (couple million) and my good friend doesn't need it. Just saying it has caused some, but probably not a lot, of resentment.