Some high profile individuals, not just Bill Gates and Elton John, believe their children should work hard to appreciate the value of money. Growing up super wealthy can often lead to a sense of entitlement and a lack of drive. After all, if everything is handed to you why should you have to work for it? It’s often this reasoning that has led many, to disinherit children. Instead of just handing over their wealth to their offspring, they believe they are presenting a valuable life lesson.
If you want to disinherit because a child will put the family money at risk, disinheritance may not be the answer. The use of a Protection Trust can achieve your goal of preventing your child from “blowing the dough.” There are two major consequences of disinheriting: 1) The Lawsuit; and 2) The left out child becomes a burden to their siblings.
Your child should know you are omitting them from your inheritance plan for the following reasons: 1) They may be counting on the inheritance to help get through life; 2) All the children need to know the reasons for disinheritance; and 3) Most important, after hearing they are going to be left out, it may motivate them to shape up and change their ways. Never give up hope, as the child may change, even if the reason is money.
Solutions if the parents disagree on distribution:
1. An “Heirship Agreement” which legally binds the last spouse to die, to leave the family money to all the children equally.
2. Terminate the Right of Survivorship and leave your half of the property outright to the disinherited child.
3. Use a Life Insurance policy to guarantee some money goes to the child.
4. Allocate a portion of your wealth to an
Irrevocable Protection Trust.
Using these precautions may be inconvenient, but microscopic compared to the expense and burden to your other heirs. Be Educated! Be Proactive!