As estate planning attorneys, we hear of many estate planning myths and misconceptions from our clients. Perhaps the most common myth that has lasted the test of time has been the $1 inheritance myth. While it comes in various forms, the idea is that you, as the parent, cannot disinherit one of your children, so in order to get around that limitation, you leave them an inheritance of at least $1, thus effectively disinheriting them. Unfortunately, this only creates more problems later on.

Disinheriting Someone in General

Before we get into the issues with the $1 inheritance, we should discuss disinheriting someone in general. There are many reasons why you might want to disinherit someone – not all of them negative. In fact, it can sometimes be more beneficial to disinherit someone, which might sound a little counterintuitive, but we’ll discuss that more below.

Who You Need to Disinherit

Firstly, let’s discuss who you need to disinherit. If you do not have a distribution plan laid out either through a will or a trust, the California Probate Code does lay out who your heirs are and how much everyone is going to receive. While leaving your estate distribution up to the state by default, the distribution plan is relatively commonsense. Your children each receive an equal portion of your estate, going down to their children, before coming back up to your parents, siblings and onwards depending on how many people in your family passed away before you did. To be a part of this list, the potential beneficiary needs to either be a blood relative or legally adopted.

Thus, your blood relatives are those who would need to be disinherited, starting with your children. Additionally, if you disinherit someone, this will preclude anyone from their “family line” as well, thus not needing to keep an exhaustive list of every possible family member if you choose to disinherit someone.

How to Disinherit Someone

Next, let’s discuss how you go about disinheriting someone. To address the $1 myth, yes, you can disinherit children without leaving them anything. However, there is a certain way that you should go about doing so. If you do plan on disinheriting someone, you should do so in writing. If you don't have a writing, the California Probate Code, as I mentioned, is going to step in and provide how your distribution is going to be laid out.

To disinherit someone, you need to have it in writing, and you should acknowledge that person specifically and say that you are intentionally not leaving them anything in the distribution of your will or trust. The act of acknowledging that person makes your intent clear that you were intending for that person not to receive anything. Again, you do not have to leave them a single dollar.

Why You Would Disinherit Someone

Next, we’ll discuss why you would want to disinherit by someone in the first place. As discussed, there are many reasons why you might want to disinherit someone – not all of them negative.

Black Sheep

However, the first and most common reason is a negative one – when the disinherited person is the black sheep of the family. These are children or grandchildren that are no longer in the picture. Perhaps they have some drug problems or even financial troubles. This can coincide with legal problems they have as well. Are they behind on taxes to the government? Do they have outstanding child support or alimony? Matters like that are going to skim off the top of any inheritance they might get. Additionally, the common thought is that you're essentially giving your estate to somebody else because your child ran into some problems.

Providing for Grandchildren or Charity

Another common reason we see our clients disinheriting children is where the parents want to leave something to charity or oftentimes grandchildren. This is typically where the parents consider their children do have done alright by themselves, and therefore no longer need mom and dad’s money, but want to make sure their grandchildren are taking care of. In this situation, we do still have to specifically acknowledge those kids and say the parents provided for them during their lifetime.

This process is the same if you wanted to leave something to charity through your will or trust. We had a trust administration a few years back where a lady did regularly make charitable contributions during her lifetime and even provided charitable contributions at her death through her trust. She actually went further and also provided for distributions to grandchildren and nieces and nephews. She skipped over her children, but intentionally so.

Planning Around Public Benefit & Special Needs

Lastly, a common reason we see someone being disinherited is when doing so would actually provide them a benefit, which of course, sounds counterintuitive. How would it be benefiting them by intentionally not leaving them anything? This arises where you have someone you want to provide for, but who are on some type of public benefit like SSI or disability. This often is due to the person having some type of disability, whether it be mental or physical, and thus they need those public benefits in order to be taken care of.

Your worry is likely that if you are not around anymore to help, you want to leave some of your estate to them so they can be taken care of. How do you do that without interfering with their public benefit by causing them to be disqualified? For example, under SSI, simply being entitled to an inheritance is enough to have one disqualified from the program until they use up all that money. According to SSI, being a listed beneficiary of a trust that is ready to distribute (I.e., after the trustor has passed and thus the trustee has to distribute according to the terms of the trust) means that person is entitled and thus the money is considered as being owned by the person, even if they haven’t received a cent yet. This would allow SSI to end those benefits and force the person to have to reapply, and all the headache associated with doing so.

To take the complication further, the person cannot even disclaim their inheritance because as far as SSI is concerned, it's too late. They are entitled to the funds; thus, you have access to the funds, therefore no more SSI benefit. With that, a way to circumvent these very strict rules while still providing for somebody is through what's called testamentary trust.

A testamentary trust, in essence, is a trust that does not come into existence until some act or event has taken place, which in this case, is typically, you're passing. As an illustration, if you want to provide for your son who is disabled and on some type of public benefit, you should set up a testamentary trust to receive what you want to go to your son’s care. The testamentary trust is supposed to operate on behalf of your son and therefore pays for various expenses he might have that maybe aren't covered by public benefit or that public benefit may not mind that you're receiving outside funds in order to pay for. The most common version this kind of testamentary trust takes is what's called a special needs trust.

A third party is the manager of the trust and therefore your son doesn't have access to those funds, even though they are to be used for his benefit and then he is no longer disqualified for public benefits. Taking care of those that may have very special needs is an extremely common way or extremely common reason that we ultimately may disinherit a child.

The Greater Complications of Leaving a $1 Inheritance

Lastly, we’ll touch on the fact that leaving somebody an inheritance, even if it is $1, may actually create bigger complications and bigger headaches for your successor trustee later on. Your successor trustee is the person who is going to step in at your death and administer your assets through your trust. The successor trustee does have various duties to perform, and they have obligations to the beneficiaries of that trust. Coinciding with that, those beneficiaries have rights. The two main rights we are concerned about here are the right to receive notice and the right to an accounting.

If somebody is a beneficiary of a trust, they are entitled to an accounting of all of the trust assets, no matter how much they actually receive as an inheritance. Additionally, they are entitled to receive notice on the various actions taken by the successor trustee. This means if I'm only receiving $1, I have just as much right to know what is going on with the entirety of that trust estate as if I was receiving 90% of it, for example.

This means that handing someone the right to information and notice by giving them a single dollar often simply hands them a right to be a bother to the successor trustee and create a headache in the administration as they now have an open door to inspect everything.

In Summary

To clarify, no, you do not have to provide someone a $1 inheritance if you really want to disinherit them. If you do have children that you either need to disinherit because of a problem or due to some type of disability and/or being on some type of public benefit, you do need to acknowledge that person in writing and say that you provided for them during your lifetime, but you do not have to leave them $1.

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