What does it take to get written out of the family will? Is it betrayal, gambling, cheating, a lack of affection, or what? Our report this week delves into this thorny issue and finds some answers.

Nasim Afshar, 60, an attractive Persian woman, met her husband, British-born Nigel Ruddy, in Germany and was married to him for over 15 years. No one could say their marriage was in trouble. They loved each other.

Last month, Nigel died unexpectedly of heart failure in a hospital near their home in Barcelona. Nigel had been a thrifty man, always saving, even opting for wearing heavy jackets in home during the winter to save on heating bills.

He had one son from a previous marriage who enjoyed wine, women and gambling. Nigel always tried to teach his son the values of saving, but most of the time it went in one ear and out the other. But nevertheless, Nigel loved him.

And he died a rich man. Living in Spain permitted him to avoid most taxes and together with his properties in England and shops in Germany, he was worth well over $50 million.

This week two of Nigel’s wills surfaced, both providing for nothing for his wife beyond a prepaid debit card loaded with 10,000 euros and the right to “stay” in their home until she died. The remainder of his estate of millions went to his son.

What caused Nigel to disinherit his wife Nasim?

Sociologist Tom Brittan says many things built up over the years could have led to a spouse being disinherited at the final moment.

“Perhaps Nigel caught Nasim cheating during the marriage, but chose to do nothing over the years to keep a status quo marriage going,” he says. “And when dealt with death, he said ‘too bad, Nasim, this is your punishment.’”

Complications abound

Executors and estate planners are seeing more of this now, as multiple marriages and affairs are rampant. Meanwhile, the lawyers say it’s gotten harder to keep balancing between the deceased and all the would-be heirs.

Hollywood’s fetish for turning the reading of the will into a ritualistic cliffhanger has left its mark on generations of wealthy families, despite the best efforts of their estate planners.

The heavy legal lifting should have already been done. The money and property should be in trust and the surviving spouse should know exactly what the marital contract lays out as his or her share of the estate.

But the drama of stringing a hated relative along until the end still be irresistible for a testator with a grudge, even if it makes an already fractured family situation both worse and permanent.

“We see it all, and the decisions around who gets excluded from the inheritance are always unique,” says Michael Roberts, who runs Reliance Trust’s personal trust business.

“Any time you combine the financial and the emotional levels, every family is going to be reacting to its own history and setting rules for its own future.”

Finding a compromise before the coffin shuts

I couldn’t find a single attorney who relishes the prospect of helping a disgruntled client disinherit a relative — much less push their way back into an estate they’ve been deliberately shut out of.

Most are more sympathetic to California estate planner Jim Leese’s policy of trying to get all parties to reconcile their differences from one side of the grave or the other.

“Unless the hurt or ignored client acts responsibly and has the talk with the person who is offending them, the effect of the out-of-the-blue disinheritance may unwittingly breed family contempt between siblings for generations,” he recommends.

This means one last try to work things out before the aggrieved parent or spouse signs the relative out of the will. Even if it fails, at least the underlying issues come out where people can work on them.

Children might not know how deeply they’ve alienated their parents, and the threat of being cut out of the estate gives them a powerful motive to realize how serious the estrangement has gotten.

Only a prenup can freeze the spouse out

A spouse also gets the chance to reevaluate the relationship — or consider divorce.

In the United States, there’s not much point in waiting until the will is read to “surprise” a disinherited spouse because there’s not much leeway for disinheriting a spouse in the first place, the experts tell me.

“It takes work to leave a spouse with nothing,” says South Carolina estate planner Evan Guthrie.

In community property states, the spouse is entitled to half the marital assets, and he or she can petition for a share of the estate everywhere else, except in Georgia.

That’s the house, the cars, anything that passes through probate and sometimes even life insurance and other assets that avoid the probate process.

Unless previous agreements expressly signed that right away, no estate plan can interfere with that elective share, so any attempt to cut him or her out will ultimately be symbolic only.

Even in Georgia, the spouse is entitled to at least a year’s support from the estate, whatever else the will says.

Naturally, this can force wealthy families to sell a house, business or other property in order to give the widowed spouse a legal share.

And this, in turn, makes a prenuptial contract a necessity when such property is at stake. If the relationship has deteriorated, it makes more sense to take a fresh look at any prenup and renegotiate it now, rather than let your client try to take revenge through a will that the court will simply overturn.

Such a revised marital contract might not ultimately be much cheaper for your client than a divorce, but at least it creates an opportunity to establish what assets are off the table — and which ones the spouse can legitimately claim.

Of course, it eliminates the sour punchline of “surprise, you get nothing” when the will is read, but your client won’t be around to laugh either way.

Think of the interests of the heirs your client does want to protect.

Trust eliminates the uncertainty

The motives for cutting a relative out of an estate range from the most primal — hate, abandonment, regret — to the most rational.

Plenty of blended families work to limit what the spouse and children from a second or third marriage can inherit, in order to protect the interests of the original sons and daughters.

Others simply prefer to allocate the wealth they leave behind to relatives who need or deserve it the most.

Children who stay at home to take care of a parent may get it all, while extremely successful offspring may be passed over in favor of their siblings.

Some children may not have what it takes to responsibly manage their share of a family business, in which case there’s not much sense in courting disaster in the name of fairness.

Merit and need are subjective decisions, so lawyers warn that clients should discuss even the most “high-minded” disinheritance schemes with their families before committing their wishes to paper.

That way, when the will indicates that a child “receives nothing, and knows the reason why,” there’s actually no room for misunderstanding.

On that note, it may sound cruel to refer to beloved relatives by name and then acknowledge that they’re not entitled to a share in the estate, but it’s actually best practice.

Naming the “disinherited” son or daughter minimizes the odds that they — or their advisors — will contest the will as incompetently forgetting that they’re in the picture. Even if the relationship is good, this is a chance to express the love, while spelling out the lack of a financial obligation.

As always, putting the assets in trust can eliminate a lot of the misunderstandings.

If competence is an issue, the trust can ensure that the relative benefits from the economic value of the assets without taking an active role in the way they’re run.

And since individual beneficiaries don’t need to know what their relative shares of the income are, unequal bequests can be handled discretely, without the public announcement that Hollywood associates with the reading of the will.

That’s what trust officers are trained to do.

“The trust business is really about supporting family dynamics,” says Michael Roberts of Reliance Trust. “At the end of the day, the financial aspect is only the most obvious aspect of that.”

Scott Martin, senior editor, The Trust Advisor.

Permalink: http://thetrustadvisor.com/news/disinherit