One reason that people sometimes give for disinheriting someone is that that person has frivolous spending habits. It may just mean that the older person who is doing the estate planning does not have the same sorts of values that the younger person – who will inherit – has when it comes to money.
For example, perhaps a grandparent is thinking about leaving money to one of their grandchildren. But they know that this grandchild has a lavish lifestyle and high levels of debt. The grandparent is worried that the inheritance will quickly be wasted or taken by creditors. They decide to disinherit that young person and leave them nothing.
A trust may be a better option
But the problem with disinheriting people is that it can sometimes lead to disputes. That heir may claim that the will is fraudulent, that other heirs influenced their grandparent’s decision, that they were simply forgotten and not intentionally disinherited, or something of this nature.
To avoid these disputes, it may be wise to put the money into a discretionary trust. The trustee chooses how the money is spent, and it can’t be wasted frivolously. But the heir still gets the inheritance that they were expecting, so they’re not going to challenge the will and they’re not going to feel slighted in the same way. A trust could be a way to protect the inheritance from that frivolous spending, while still giving that heir a significant financial benefit.
Discretionary trusts are also just one example of how estate planning can be done and how trusts can be use. Anyone involved in this process needs to be sure they understand all of their options.