Myth 2: Disagreements in Estate Planning… Do I Have a Voice?
| By Holly Morris
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 ¼ 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 a 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 disinheritance is a minor, but substantial inheritance. That way, if the heir challenges, they have something to lose.
In this case, if Moises challenged it, he would no longer be a beneficiary regarding the trust with ¼ of the estate. While being one of several beneficiaries of a trust with only ¼ 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.
Make sure you have a voice for these hard decisions. Call Walker Lambe today to make sure your estate plan is in order at (919) 493-8411.