advertisement
By all accounts, Anna Nicole Smith loved her baby daughter, Dannielynn. She shielded her from the media, provided her with constant care and surrounded her with every comfort.
She also accidentally disinherited her.
Here's how: In a will executed in 2001, the celebrity model arranged to place all of her assets in a trust and identified her son, Daniel, as the beneficiary, rather than use the more inclusive term "my children" or "my issue."
When Daniel died before his mother, the trust legally lapsed for want of a living beneficiary, since Smith had failed to name a contingent beneficiary for Daniel. Then, because she failed to update her will to include Dannielynn before her own demise in 2007 at age 39, her sole surviving child was accidentally disinherited.
As a result, Smith's estate, including the fortune she might've someday been awarded from the estate of her late husband, Texas oil billionaire J. Howard Marshall II, will likely pass through the laws of intestacy -- that is, as if she had died without a will.
But don't cry for Dannielynn, Argentina. Although children have no legal right to inheritance throughout most of the United States, many states do provide protection against accidental disinheritance. Because she was born after the execution of Smith's will, Dannielynn will likely be considered a pretermitted child who was accidentally disinherited and thus will likely inherit the bulk of Smith's estate.
But had Smith had other children or stepchildren, Dannielynn's expected windfall would almost certainly have been challenged or shared.
Unintended consequences
Russell Adams, an estate attorney in Granville, Ohio, says accidental disinheritance is a growing problem."Without a doubt. I think it's because we have so many kinds of death-disposition instruments available now," he says. "The development of trusts has created a whole new area of accidental disinheritance. People are making the same mistakes in trusts that they used to make in wills. People often think trusts are great, that they fix everything, but they're actually often a little more susceptible to error than wills."
More from MSN Money and Bankrate.com
Jean Setzfand, the director of financial security for AARP, says: "The possibility of trying to manage multiple accounts and keeping track of where everything is and who the beneficiaries are can be very difficult. It definitely can be a problem."
The proliferation of pay-on-death bank account options, beneficiary designations on IRAs and 401(k) retirement accounts, survivorship options on home mortgages and deeds, and other instruments that pass assets directly to beneficiaries can create an inheritance jigsaw puzzle where a few pieces may go missing.
A related risk: making sure that elderly parents don't accidentally let their life insurance policies lapse and thereby inadvertently disinherit their loved ones.
Where do wills typically take a wrong turn?
1. Failure to update a will
Life events are often reasons to celebrate or grieve. They're also good reasons to update your will.Joanna Grossman, a law professor at Hofstra University who had tracked Smith's legal battles, says a few simple changes to Smith's will could have meant millions to young Dannielynn had Smith predeceased Daniel.
"If she had written the will in the first place to say, 'I leave everything to my children, if any,' none of this would have happened," she says. "There are lots of different missteps, but certainly not updating the will after a marriage, a divorce or the birth of a child are key ones. Many estates come undone because of a significant change in family status after the will is made."
The solution: Always update your will after one of life's "big three": marriage, divorce or the birth or adoption of a child.
2. Disinheritance by faulty will
A first step in a probate proceeding is to determine the validity of the will. If you failed to sign or had someone else sign your will for you, it could be found invalid. Similarly, if you failed to take the proper steps to void a previous will, it could be ruled as valid, again against your intentions. In either case, unintended consequences could surely follow.Adams says do-it-yourself wills may be especially prone to disqualifying technical errors. "I had one a few years ago that, upon review, generated about eight different accidental disinheritances," he says. "If you want to do it yourself, when you're done, take it to someone who generally knows what they're doing. An hour-long review can tell you whether you've got problems."
3. Disinheritance by stepparent succession
Smith again comes to mind here. Her highly controversial 14-month marriage to Marshall put her on a legal collision course with his son, Pierce, who sought to keep his erstwhile stepmother from inheriting millions after his father's death in 1995.The court battles continue today, even though none of the three participants is living. The holes the elder Marshall failed to plug in his will are too numerous to mention. Suffice to say, his true intentions came down to a she said, he said standoff for the court.
The common accidental disinheritance by stepparent goes as follows: A widower remarries and, thinking to save a few bucks, retypes his simple will, leaving everything to his new wife. When he dies, the new wife passes her assets on to her children, thereby disinheriting his children, which was not their father's intent.
"One young man in this situation told me, 'You know, I wasn't worth $100 to my old man (to get his will reviewed),'" Adams says.
The solutions: The father could have identified his descendants as express heirs, established a trust that limited his wife's rights to those assets and named his children as ultimate trustees. He also could have entered a mutual will with his spouse so that their assets would be distributed among both families by a formula they would design.
"One of the problems with wills in general is that they are never to be used immediately, so you're always anticipating the future," Grossman says. "The role of a good lawyer is to anticipate all of the potential future scenarios and to draft around them. You want to draft for every contingency."
Continued: 4 more common mistakes
Rate this Article
High
