In many cases a parent disinherits a child not because the parent hates the child but because the parent feels hurt. But, there are alternatives to completely disinheriting a child or other loved one.
The alternative depends on the underlying reason for disinheriting the person. Sometimes, fair does not necessarily mean equal. Occasionally, I will advise parents to leave more money to a child in need. For parents facing this type of scenario a “sprinkle trust” may be a good option. In a “sprinkle trust” an independent trustee assesses the financial situation of the heirs and has the complete discretion to distribute any money in the trust according to each child’s needs.
Some parents disinherit a child with an addiction or some other difficulty. In this situation the parent is faced with enabling the dependency or disinheriting the child. An alternative to disinheriting the child is creating an “incentive” trust requiring them to go through rehabilitation and agree to random drug testing. An incentive trust can be used to help the child if they meet the requirements created in the trust agreement.
Sometimes I meet with a parent who wants to disinherit their child who has a developmental or other disability or a loved one who is in a nursing home so their loved one will stay eligible for Medicaid. This drastic measure is not necessary. For children or spouses with disabilities such as Down’s syndrome, or Parkinson’s Diseases or Alzheimer’s Disease, a Special Needs Trust can assure their loved one remains eligible for Medicaid benefits. The trust then pays for things Medicaid will not cover – the additional cost of a private room, private nurses, vacations from the facilities — without causing the patient to lose Medicaid benefits.