Myth 2: Disagreements in Estate Planning… Do I Have a Voice?

By Holly Morris

Fashion designer Oscar de la Renta died in 2014 at age 82. He left one son, Moises de la Renta. He also left behind his second wife, Annette, and her three children from a prior marriage.

One might expect Oscar to leave a substantial sum to his only son, Moises. However, Oscar chose to leave most of his $26 million estate to his second wife, Annette. Moises is one of the beneficiaries of a trust with less than ¼ of his estate. The other beneficiaries of that trust are Annette and her three children. There is a “no contest” or “in terrorem” clause which completely disinherits Moises if he contests Ocsar’s will.

Oscar and Moises had a falling out a decade ago when Moises attempted to start his own fashion line. Oscar’s estate plan demonstrates a way to disinherit someone.

First, you would include a “no contest” or “in terrorem” clause. Such a clause provides that, in the event of an unsuccessful legal challenge by that person, they receive nothing. (Note, such a clause is not valid in some states.) Some practitioners and clients simply choose this route. However, then there is no disincentive for a challenge to the plan. If the heir challenges unsuccessfully, they receive nothing. However, if they do not challenge, they also receive nothing. The second element of a disinheritance is a minor, but substantial inheritance. That way, if the heir challenges, they have something to lose.

In this case, if Moises challenged it, he would no longer be a beneficiary regarding the trust with ¼ of the estate. While being one of several beneficiaries of a trust with only ¼ of the estate is far less than what his intestate share would be, he would have to think twice before risking that by challenging the plan.

Make sure you have a voice for these hard decisions. Call Walker Lambe today to make sure your estate plan is in order at 919-493-8411.

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