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DAVID SWANN / DSWANN@STARBULLETIN.COM Left out Most people are seeking the best way to get assets to their loved ones. However, sometimes the best way to do that is by disinheriting or threatening to disinherit someone.
Disinheritance is a serious option
By Judith Sterling and Michelle Tucker
Perhaps the most common form of disinheritance in an estate planning document is an "in terrorem" or "no nontest" clause. Literally, an in terrorem clause is designed to instill terror in anyone considering challenging the will or trust which contains it. Such a clause can be useful if you expect your heirs to challenge your wishes. No contest clauses are particularly useful when the risk of challenge is particularly high, such as: Leaving assets unequally to children, leaving assets to a spouse who is not the parent of your children, leaving assets to a same-sex partner, etc.
Such a clause says, if someone challenges the document that contains it, they receive nothing from you under that document. A no contest clause works best when you leave something to the potential challenger. If the challenger would receive nothing anyway, he or she would have nothing to lose by challenging your wishes. A bequest that is significant under the circumstances might make the challenger think twice before challenging your wishes.
You also may choose to disinherit someone if they do something destructive. For example, William Garland Jr. had a son, Richard, and two daughters. Richard had been very irresponsible during his teens and William was concerned that he might have a criminal future. In order to discourage Richard from a life of crime, William put a clause in his will that disinherited Richard if he was convicted of a felony prior to attaining age 30. In fact, Richard did get into trouble and pled guilty to a felony drug charge. Ten years later, Richard had cleaned up his act and was a respected, law-abiding citizen. Pursuant to Arkansas law, Richard was able to have his prior felony conviction "expunged" or removed from his record. Richard sought to receive his share under William's will, but his sisters challenged him. The trial court found in Richard's favor but the Arkansas Court of Appeals ruled against Richard, finding that he had been convicted of a felony even if it had later been expunged. The Garland family situation underscores the need to be careful when you intentionally disinherit someone.
Disinheritance also can be inadvertent. In most states, adoption of a child automatically severs the child's inheritance rights from his or her biological family and establishes that child's rights to inherit from the adopted family. In Hawaii the default statute regarding adoption is complex. It's best to consider carefully how you want adoption handled in drafting your wills and trusts.
Judith Sterling and Michelle Tucker are certified public accountants and partners in the Honolulu law firm of Sterling & Tucker. Reach them via www.sterlingandtucker.com or by calling 531-5391.
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