Many clients come to our office with uncertainties when it comes to final distributions. One of those uncertainties surrounds the concept of unequal shares and exclusions.
Under what circumstances can beneficiaries be excluded? Can beneficiaries challenge your plan?
Reasons For Unequal Shares And Exclusions
Not all people disinherit beneficiaries or reduce shares as a form of punishment. In fact, there are often valid reasons some do so, including:
Special needs – Leaving money to a beneficiary with special needs outright may disqualify them from receiving government-provided benefits. However, advanced estate planning techniques can ensure special needs beneficiaries receive assets while remaining eligible for such programs.
Substance abuse – Unfortunately, some heirs who suffer from substance abuse are disinherited for fear that the inheritance would be squandered to fuel their addictions.
Financial security – Beneficiaries who are financially secure may have their shares reduced so that the inheritance can be allotted to beneficiaries who are not as financially secure.
Debts – Some people reduce shares to account for debt that the beneficiary owed.
Creditor issues – If a beneficiary has known creditor issues, they may be excluded to prevent money from landing in the hands of creditors.
Estrangement – Some estate planners exclude beneficiaries they have lost communication with.
Consider The Implications Of No-Contest Provisions
Even if you choose to exclude an heir or leave unequal shares, beneficiaries can still contest your estate plan if there is probable cause to do so. California Probate Code section 21310(c) states that beneficiaries may contest a will or trust if it was unlawfully executed. Examples of probable cause to contest a will include, but are not limited to:
• Lack of due execution
• Lack of capacity
• Menace, duress, fraud or undue influence
To prevent your will or trust from being contested, it can be a good idea to consult with a seasoned attorney to understand no contest clauses in greater detail.
Sometimes it may be necessary to adjust shares to suit each beneficiary’s individual needs. Having the conversation ahead of time and planning early could increase the chances that your end-of-life wishes will be followed.