Disinheriting Adult Children for Their Political Beliefs Revisited

Transcript of Podcast Episode 258

Hello, this is Bill Rainaldi with another edition with Security Mutual’s “SML Planning Minute.” In today’s episode, we take a look back at one of our favorite previous episodes, “Disinheriting Adult Children for Their Political Beliefs.”

We’ve all heard stories of Thanksgiving dinners gone terribly wrong. The food is great, the mood is good, and everyone is happy to see each other. But it all goes terribly wrong when politics enters the room.

Too often a family disagreement over climate change or free speech evolves into something far more serious: long term estrangement. In today’s hyper-partisan environment, strongly-held beliefs and hurt feelings can become a toxic combination.

The New York Times attempted to take on this issue in a March 2022 column by a writer known as “The Ethicist.” They described an 80-year-old who no longer speaks to their children or grandchildren, the result of their political disagreements. The columnist’s suggestion was to leave some money to the grandchildren for when they reach adulthood—in the belief that their views will evolve—and the rest to various political and charitable organizations that the grandparent believes in.

The Ethicist makes two important points. First, it is perfectly legal to disinherit a child or grandchild. But it is also a very complicated and serious matter. As author Susan Lipp points out in a recent article for Wealth Management, the emotional effects of disinheriting a child could destroy their physical and mental well-being. And it might not make any difference. Eliminating a family member as an estate beneficiary isn’t likely to change anybody’s mind, and perhaps even worse, it may result in expensive litigation.

The New York Times article suggested that you could simply skip a generation and give your assets to your grandchildren rather than your children, if the disagreement is with the children. But some experts have pushed back against that. For one thing, when working with wealthy families, these types of gifts can be made impractical by the Generation Skipping Transfer Tax, or GST. If applicable, the GST Tax rate is a flat 40 percent.

But perhaps more importantly, direct gifts to grandchildren can make the already frayed emotional situation even worse. Some experts feel that such a maneuver would be seen as an even bigger insult, and would cause more damage, than simply disinheriting everyone.

There is also another factor that is often missed. As the parent ages, it is common for the elderly to become dependent on their children for support. Disinheriting the child would undoubtedly make the situation much more complicated and could make things much worse for the parent in their later years.

But wealthy families may have another option. The authors suggest that the parent could perhaps place their family bequests into a trust with a third-party trustee. They would then appoint trustees who they believe share their political beliefs.

The trust documentation would require the trustees to make distributions in ways that support the parent’s core values. For example, if the beneficiary makes a contribution to an organization that is deemed consistent with the parent’s desires, the trustee can be authorized to make a discretionary distribution to the beneficiary for a similar amount.

Divergent political views are only one of many potential reasons that a parent might consider disinheriting a child. Other families are dealing with children who are physically disabled, financially irresponsible or dependent on drugs or alcohol. In many of these cases, a properly structured trust can go a long way in resolving these issues in the best way possible.

How you decide to treat your children in your estate plan says a lot about your values and faith. Perhaps, not disinheriting a child who has caused you heartache can send a message of love and forgiveness. But disinheriting a child, even for what seems like good reasons, can be a sign of hostility, resentment, and a lack of love.

Your Security Mutual Life insurance advisor can help you get the process started.  Your advisor will assemble your team and coordinate with your attorney and estate planning tax professional to review your situation and to determine the plan and strategies that are appropriate for you and your family.

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