Sunday, February 18, 2007

Children & inheritances & lessons from Anna Nicole Smith

Along with the snow that shut down our courthouses and schools came the media circus following the death Anna Nicole Smith. I usually avoid these kind of stories but with courthouse and office shutdown I could not seem to miss the story. Even NPR was in on it! So, I assume everyone knows the outline of the story and I can pass onto a more interesting item.

For me Ms. Smith's Last Will and Testament was very interesting. She left everything to her son and her son predeceased her. Nothing to the newborn child with the unknown father. Wills, Trusts & Estates Prof Blog analyzes the Will here.

Nothing keeps a parent from disinheriting a child - so long as the proper procedure is followed. At the simplest and with an existing child, name the existing and say they get nothing. What I am finding unusual is leaving out the unborn child. I suspect some explanation for that hangs upon the identity of that child's father.

Let me try to explain my perspective here.

The usual estate planning clients usually have one goal: they want to make sure that their money goes intact to their heirs. Divorced clients sometimes have an additional goal of making sure that the former spouse cannot get their hands on the money.

While a guardianship will protect a child's assets till they reach age 18, this a bit of a clumsy approach. First, some people do not want their eighteen year olds having absolute access to a bunch of money. Second, someone has to come forward and request a guardianship. Creating a trust is more complex but a trust avoids the problems of a guardianship.

So, the tools were quite well within the reach of a woman with the financial means of Anna Nicole Smith. Maybe we will learn why she chose to completely disinherit the baby. All I can do is be very surprised.

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