The term “unintentional disinheritance” may be foreign to some, but I can assure you it is an all-too-common action seen quite frequently by financial advisors.
What is it?
Unintentional disinheritance is when your will, trust, or estate is set up in a way that disinherits your intended beneficiary. For example, if you have children and you want them to receive your estate, but they are unknowingly left out. That is unintentional disinheritance.
Let’s go over a real-life example.
The Case of Bob
85-year-old Bob was married to his third wife, Mary, and wanted to make sure she was taken care of. However, he also wanted to ensure that his two children, John and Jane, receive the remaining proceeds of his testamentary trust.
Bob’s will was drafted so that a trust was created upon his passing with Mary designated as the income beneficiary, leaving Bob’s two children as the remainder beneficiaries.
When Bob passed away, all of his probate assets were moved into the trust. However, we discovered an open bank account.
Bob had opened a joint tenant with right of survivorship (JTWROS) account at the bank with Mary listed as the joint owner.
What happened to the $1.2mm JTWROS bank account upon Bob’s passing?
You guessed it: unintentional disinheritance. Mary ended up with the $1.2mm dollars, and Bob’s two children received nothing from the account. In the end, Mary’s child ended up with the funds. As you can imagine, this is not what Bob had intended.
What can you do?
The first step is to make sure you have a solid estate plan in place. At a minimum, that includes a last will and testament, and if needed, a trust. It is also helpful to work with a team that knows the details of your plan—your attorney, accountant, and investment advisor, for example.
In the future, if you decide to change, amend, alter, or create a new account, it is best to understand how those funds will be transferred should you pass away. Talk it over with your advisor, down to every last checking and savings account, to ensure you understand the transfer process.
HFG Trust would be happy to sit down and discuss all of the plans in place for your estate. And if needed we can help begin the estate planning process.
HFG Trust is a State of Washington chartered Trust company. We at HFG Trust will continue to provide wealth and portfolio management, and for those clients who require trust services, we can satisfy that need as well. Please contact us if you would like more information or want to consider establishing a trust for your estate planning needs.
Mike Tallman, CFP®, CTFA®
Senior Trust Officer
