Joe and Mary created a revocable living trust during their lifetime to avoid probate and protect their only daughter Cindy and their two teenaged grandchildren. They thought they had successfully taken steps to protect their loved ones. Unfortunately, their estate plan didn’t work out as they planned, particularly for their grandchildren.
When Mary passed away five years ago (Joe had died two years prior), all the assets were distributed outright to Cindy as the trust required. About a year after her mother died, tragedy struck Cindy, as she was killed in a car accident. As typically would occur, all of her assets went to her husband Doug, the grandchildren’s father. The assets did not go to Cindy’s children, who were now in their early twenties and just starting out in life.
Understandably, the accident devastated the family. However, it wasn’t long before Doug found comfort with another woman (Elaine), and two years after Cindy’s death, Doug and Elaine were married.
What will happen to the inheritance Joe and Mary intended to leave to Cindy and then their grandchildren, who are now in their mid-twenties? Answer—it’s for Doug to use as he sees fit, with advice provided from Elaine of course. And when Doug passes away, if any of the inheritance remains, it likely will go to Elaine, and then her family. The grandchildren will likely never see a penny of the inheritance, despite their grandparents’ intentions.
Many people are unaware that their estate planning creates a hole that can accidentally disinherit their grandchildren. This hole is always present when money is left outright to children. This means that if you have a Will-based plan, a Trust-based plan that leave assets outright to children, a Trust-based plan that leaves assets in trust until a child reaches a certain age, or no plan at all, your grandchildren may be vulnerable to this situation.
A well-written trust that leaves assets to your children in trust properly protects your grandchildren and best avoids their accidental disinheritance. That’s why we typically recommend leaving your inheritance to your loved ones in trust.
Please contact our office if you would like to discuss your estate planning.