When you die, you want to make sure that your assets go to people or entities that you approve of. Some individuals choose to disinherit their family members, either due to troubled relationships or out of concern for how the inheritance will be used.
Here’s what you need to know about disinheriting your family, including the steps you need to take to ensure your assets are distributed according to your wishes.
You Have Multiple Options to Disinherit Someone
You have a few different ways to disinherit a family member. The best option depends on the assets that make up your estate.
One alternative is to name people as direct beneficiaries to your assets. This option works well for life insurance policies, bank accounts, investment accounts, and retirement accounts. Most of these assets either require you to name a beneficiary or they permit you to designate a “payable upon death” beneficiary. The beneficiary has no ownership of the account until after your death.
When you die, the asset goes directly to the beneficiary. It does not have to go through probate; all the beneficiary has to do is present proof of your death (like a death certificate) to the company that services the account. If you leave a vague will that says you leave all your assets to so and so, an account with a named beneficiary isn’t included in these assets.
Another option for disinheriting someone is to set up a living revocable trust. A living revocable trust is a legal entity that controls the assets in the trust. As the trust maker, you maintain complete ownership over these assets. You can even remove assets from the trust if desired.
When you die, a designated trustee disperses the assets in your trust according to your specifications. You can include detailed instructions in your trust documents for how you want assets distributed. It’s also possible to state why you want certain individuals to be disinherited.
Compared to a will, it’s much harder for a disinherited family member to contest a living revocable trust. Living revocable trusts require quite a bit of planning and thought, this makes it unlikely that a judge is going to overturn your instructions.
A will can be drawn up and signed in a couple of hours. It’s easier for a family member to argue that you were under duress when you signed the will or that you weren’t of sound mind.
You Can Use a No-Contest Clause for a Lesser Inheritance
You might want to partially disinherit a family member by leaving them less than your other beneficiaries. Perhaps you have a child who you want to receive a significantly smaller inheritance than their other siblings due to their poor financial habits.
To partially disinherit someone, you should add a no-contest clause to your will or trust documents. A nocontest clause means that anyone who contests the will or trust won’t receive their stated inheritance. Many partially disinherited individuals decide that it’s better to receive something than to risk receiving nothing.
You Usually Can’t Completely Disinherit a Spouse
In most circumstances, it’s not possible to completely disinherit a spouse. Your spouse is entitled to some of your marital property. What property they’re entitled to depends on the inheritance laws in your state, how the property is titled, and whose income paid for or funded the asset.
Michigan is a common law state; property that’s acquired during marriage is not assumed to be equally owned by both spouses. However, your spouse can usually claim ownership to one-third of your property. If you leave your spouse less than this, they can contest it. One exception to this situation is if your spouse agrees in writing to accept less than the inheritance amount provided by your state’s laws.
Want to make sure that your assets are distributed based on your wishes? Contact Bahrie Law, PLLC to begin your estate planning.