Most of the estate plans that I prepare fall into what I affectionately refer to as the “I love you” estate plan. An “I love your” estate plan follows what you would expect most estate plans for married adults would look like: Everything to the spouse and then to the kids. Easy Peasy. Now obviously, this isn’t the way it always goes, but this method of distribution certainly is the rule rather than the exception.
Most of the plans that fall into the exception do so, because the family dynamic requires it. For example, the client isn’t married or doesn’t have children or both. However, sometimes the family falls into the “nuclear family” category, but there is a reason that one or more of the children should be left out.
People are left out of the estate plan for various reasons. I’m usually given an explanation for the exclusion, and I try to listen patiently. However, from my standpoint, an explanation isn’t necessary. If someone needs to be excluded, then I’ll come up with the best way to make that happen. No one needs to convince me of anything.
One of the most common questions I’m asked when planning an estate with an exclusion is whether that person should be left a token bequest. I’ve been asked countless times over the years if they should leave a dollar to the ne’er-do-well son or daughter to avoid a will challenge. My answer is usually, no.
Folks, you can leave your estate plan to anyone you want — or not leave it to anyone you want. The exception is usually the spouse since it’s often difficult to successfully exclude them because they have certain legal rights that are difficult to overcome.
Another question that I am sometimes asked involves no-contest clauses or, as they are known in legal circles, in terrorem clauses. In terrorem clauses basically provide that if someone challenges the will, there is a penalty such as being excluded or removed for it. For almost 25 years, I have had to explain that Indiana doesn’t recognize in terrorem clauses and that they weren’t enforceable. However, I can’t say that anymore.
As of July 1, 2018, Indiana recognizes and will enforce in terrorem clauses in wills and trusts. Now this won’t affect most people, but for some, this is a monumental change. Going from saying something isn’t enforceable to something is enforceable is quite a change. It also will give a little muscle to estate plans that treat similar beneficiaries differently.
Personally, I’m not a big fan of making a big deal out of excluding someone. I’ll sometimes recommend something to the effect of, “I specifically make no provision for John Doe in this will and have done so for reasons known only to me.” It acknowledges the exclusion without giving anyone anything to challenge. However, for those of you who have concerns about excluding someone, the change in the law offers you some additional protection. Still, don’t do the dollar thing. To me that’s almost inviting a challenge.