Estate Plan Exclusions
The majority of estate plans that we prepare at our law firm leave assets to clients’ children in equal shares. Some clients make wills, and others create trusts. Some seek to keep assets protected from long-term care and nursing home costs or to minimize estate taxes. But generally the objective is to pass down the assets to the kids. However, about 10 to 20 percent of the plans that we do deliberately exclude at least one child or other important person. Family politics can be challenging, and attorneys are certainly not here to tell you how you should leave your money.
But here’s what you should know about leaving people out.
- Only Certain People Actually Count as Exclusions
New York has a statute that defines how close people are to you for the purposes of estates. It lays out your “distributees” or the people who would inherit from you if there was no will or other estate plan in place. The statute starts with your spouse and children, and then, if these family members have predeceased or do not exist, the statute has an order of priority that stretches all the way down to the children of your first cousins. The people who have standing to contest your estate plan are the people in your next-of-kin (or, in some cases, people who were beneficiaries under a prior estate plan that you had). Therefore, if you are not survived by a spouse, children, or parents, and you leave your estate to your siblings in equal shares, you have not excluded anyone. You have left your estate to those closest to you under the law. Anyone more distant than your siblings would not have standing to argue against it. The only time we actually consider it an “exclusion” is when you are deliberately leaving out a “distributee” who would inherit if there was no estate plan, and would have standing in court to contest. There’s nothing legally wrong with doing this, and we don’t judge the morals of it. It’s your money to leave how you would like. But we want to make sure we get the exclusions right.
- Excluded Parties should be Named
If you are leaving parties out of your estate plan, you should make it as secure and difficult to contest as possible. You should not just omit their names. The last thing that we want is for an excluded party to make the argument that there must have been some sort of drafting error by the attorney or lapse on your part because the document mentions everyone else but him/her. Reasonable attorneys can differ about how to exactly exclude people in the text of the document, but it is common to state something like: “I acknowledge my daughter Jennifer, but she is excluded for reasons best known to me, and she shall not share in my estate.” Leaving someone a pittance like $100 was once a favored strategy among some attorneys, but it tends to make people angry, and overcomplicates the situation without really producing a benefit to anyone. You should also be careful not to lay out a specific reason why you’re excluding a party. If, in the course of excluding someone, your will accuses him/her of infidelity, theft, or some other malicious action, it opens up the door to that person contesting and arguing that their exclusion should not be valid by alleging that the facts are not accurate. They could suggest that this may be the result of cognitive decline, undue influence by a third party, or any number of other issues. No one can really fundamentally disagree with “reasons best known to me.”
- No Contest Clauses
Some people include a no contest or In Terrorem clause in their estate plans. This added language generally states that if any individual tries to contest the document in court, he/she is to receive nothing at all, and any inheritance left to that person is to pass as if he/she had predeceased. This can be an effective way of dissuading people from contesting your wishes. However, it does not work for people that you have excluded outright. They have nothing to lose by attempting to contest if they were excluded anyway. In order to make a no contest clause work, you would have to leave the parties in question a sizeable enough amount that they would hate to risk losing. Our general advice is that if you want to exclude people, you should just do it outright, as explained here. But if you think it’s highly likely that someone will contest, inserting a no contest clause into your estate plan, and leaving him/her enough to make it interesting, is a strategy that can be effective.
This article appeared in the March 11, 2022, edition of the Senior Gazette.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.
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Michael Wagner is senior counsel concentrating on elder law and estate planning, wills and trusts. He conducts several Estate Planning Seminars and Webinars throughout the year.
He can be reached by phone at 845-764-9656 and by email.
