Should you disinherit a problematic heir?

On Behalf of | Jun 12, 2024 | Estate Planning |

You’ve been working on creating an estate plan, but there’s an issue: One of your heirs has problematic spending habits. This could be one of your adult children, so you’ve been watching their spending for some time. Maybe they always seem to have debt issues or they make frivolous purchases. You’re worried that leaving them a substantial amount of money just means they’re going to waste that money or have to pay it to creditors.

As a result, you’re considering disinheriting them. You can certainly cut them out of your will entirely, and it’s best to use a disinheritance clause to show that you’ve done this intentionally. You may be able to preserve some of your wealth in this fashion. But disinheriting someone can also cause estate disputes or hard feelings between siblings. Are there any other options?

Using a trust

One other option would be to protect the money by putting in a trust. When done correctly, this can keep the money away from creditors. Even if the individual declares bankruptcy, the funds in the trust may be protected because that person is technically not the owner of the funds. They are just the beneficiary of the trust.

Another benefit of using a trust is that you can dictate how the money should be spent. You may just pick a trustee and give them the discretion to make choices on their own. You may pick a specific goal, like creating a trust that will be used for college education costs. Either way, you make the decisions so that your descendant won’t waste the money.

The key to accomplishing these goals is to draft the right estate plan in advance. Take the time to carefully consider your legal options.