When someone expects to inherit, either because they are a direct relation or because they were in a previous iteration of an estate plan, they are being disinherited if they are removed from that plan. Often, the person who is doing this will use a disinheritance clause to make it clear that they are intentionally not leaving any assets to a specific individual.
In some cases, those who do this are concerned about the impact of a large inheritance on their family member’s future. For instance, wealthy individuals sometimes say that their concern is that getting a major inheritance will cause their adult children to stop working or putting in effort to “make something” of themselves. They don’t want the person to just live off of the inheritance without doing anything else.
Using an incentive trust
Disinheriting a family member will work in this situation, but it can cause some other complications. It may increase the odds of an estate dispute if there’s no inheritance clause. It could also create a rift between family members or cause feelings of long-term resentment.
An alternative may be to use an incentive trust. Whatever you want your family member to accomplish can be their incentive, and they only get payouts from the trust if they meet those goals. For instance, you could state that they can only withdraw money from the trust as long as they have full-time employment, ensuring that they won’t just quit their career and live off of the inheritance money.
There are many different options you can use when creating an estate plan. Be sure you carefully consider all of those at your disposal.