Investor's column: Here's how to cut someone out of your estate

According to the law, you can usually do whatever you want with your money. Therapists, ministers and rabbis might advocate that you share your estate even-handedly with your children, but genuine equality isn’t realistic these days.

Many of us are caught in a dysfunctional family, or, at least, a family with serious “issues.” Problems often come from adult children who don’t write, call or visit, substance abuse and failure to launch issues.

Make sure you feel right about disowning. Disinherited children often experience resentment, betrayal and anger. Avoid threatening disinheritance if you’re not serious because doing so endangers human relationships. Exchanging money for love and respect is often a mistake.

That said, here’s the scoop on how to cut someone out of your will:

Get organized

Make sure you’re mentally competent and have testamentary capacity when executing estate documents. Avoid using emotional or hostile language, and make sure your records are consistent with state law.

Start by anticipating legal challenges, with the help of a good lawyer, from unhappy heirs. Weak documents, contrary to your wishes, may trigger state intestacy laws to allocate your estate.

Use proper disinheritance clauses because the law is always changing. Non-contesting provisions are often found unenforceable so obtain competent legal advice. Some states allow challenges based on the omission of a child from a will as a mistake, and an estate can be adjusted.

Useful documents drafted by an attorney might say, for example, “I choose to leave no assets to my daughter Trixie Sue.”

Use unequal beneficiaries

You are not obligated to share your estate equally. One child may be an active and necessary part of a family business or wealthy, while another deserving child lives paycheck to paycheck.

Another child might have trouble supporting themselves due to Down’s syndrome, for example, or a permanent disability and may need a more significant share of your estate.

On the other hand, you might have your reasons for disinheriting a child for wrongs committed against you -- such as not sending you a Mother’s Day or Father's Day card.

Communicate in advance

Getting disinherited often leads to bad feelings. To reduce family fights and surprises on the back end, explain and share your rationale for how you plan to share your estate in advance.

Express feelings now about your estate plans, and tell why you may hope to ultimately provide better relations, less angst, for your heirs.

Stress logic, “One child needs the money more than you do,” may be an icebreaker. If you don’t do even-handed distributions, communicate this in advance.

Try it gently. Say, "I love, care, and appreciate you, but this is the way I want to handle the situation. You’ll do fine. However, I’m worried about your brother. Blame me -- I’m the one who parented and enabled him.”

Alternatively, you can try a little schadenfreude, keep your cards to yourself, and say nothing. You’ll be dead and won’t be around when the big reveal occurs.

Manage per stirpes issues

What happens if you have three children, and one child predeceases you, and the deceased child has two kids of his or her own? The children inherit 50 percent of the deceased parent’s third, or one-sixth.

You might try per capita distributions instead. With per capita distributions, the surviving two children would get 100 percent of your estate, by effectively disinheriting grandchildren of the deceased child, and would increase the inheritances of your remaining children.

Make sure you have a competent lawyer who can guide you in this process.

Avoid inadvertent disinheritance

Despite having a will, the titling of assets ranks higher when establishing ownership. Putting a son on a bank account to make bill paying easier or management decisions might jeopardize other children at your death.

Remember, the survivor is under no legal obligation to share funds, despite your intentions, because the survivor can inherit it all under the rules for a joint account with the right of survivorship.

Here are some tips to reduce conflicts with heirs following your death:

• Remember to correct your beneficiaries on IRAs, 401ks and life insurance. And remember to change wills and trusts to cut-out, if allowed, your ex-spouse.
  
  
• Leave specific instructions for the sale of real property due to economic disparity between the haves and the have-nots.
  
  
• Don’t feel obligated about leaving or not leaving money and other property to non-deserving family members.

Jim Germer is a certified public accountant and financial adviser at Cetera Financial Specialists, LLC, member FINRA/SIPC, located at 100 Third Ave. W., Suite 130, Bradenton. Call (941) 746-5600 or email jim.germer@ceterafs.com.