Deciding on Beneficiaries

Sep 2016


I had a recent meeting with a client regarding their estate plan that I thought I would share with you. The client is divorced and in his mid-70s. He was married for over 30 years and has three children. According to him, the divorce was very nasty and the divorce changed his relationship with his children. As he describes it, before the divorce he had a wonderful relationship with his children and since the divorce, which is over five years ago, he no longer has any relationship with two of them. In fact, as he describes it, he has grandchildren that he has never seen. He says he’s tried to reach out to the two kids but his efforts have been unsuccessful. As we sat down to discuss his estate plan, the one question he asked me was what I thought the right thing would be with what he should do with his money.

The way I interpreted the question was despite having no relationship with the two children whatsoever, should he still leave them part of his estate upon his death. As I explained to the client, I don’t believe that as a matter of right people are entitled to an inheritance. I believe in most cases inheritances are earned by the love and devotion that someone has demonstrated. I also explained that in many situations are based upon the needs of the beneficiary. For example, I have drafted many estate plans where parents treat their children differently, not for a lack of love and devotion but rather, because of financial concerns. In other words, one child’s financial situation may be such that a larger inheritance is called for. The bottom line, there are no hard and fast rules when it comes to inheritances and people shouldn’t try to do what everyone else is doing but rather, they should do what makes sense for their individual situation.

After the discussion with the client, he did decide to totally disinherit the two children and leave the money to the child who has been very good to him. At the beginning of the meeting the client was tense, but by the end of the meeting he was relaxed and relieved. Relieved in the fact that from the beginning he knew that he didn’t want to leave money to the two children but he needed the assurance that he was doing the right thing.

When it comes to choosing beneficiaries, people generally name all their children as their alternate beneficiaries. However, you should never do what the majority does; rather, you should do what makes sense for your individual circumstances. There is nothing to say that all children should be treated equally. You may love them equally; that doesn’t mean from a financial standpoint their needs are the same. After all, when the kids were growing up, if one of your children needed braces you didn’t say I know I have to spend an equal amount on my other children. Rather, more likely than not, you treated them each according to their individual needs. The same thing should apply when it comes to estate planning.

I recognize when you don’t treat children equally there could be some hard feelings. That is why if you think there would be hard feelings, you can either explain to your children ahead of time why you’re doing what you’re doing, or you can add something to your estate planning documents that explains your reasoning. You’re under no obligation to do so; however, if it would make you feel better, you should.

It’s also important to remember when you do estate planning that what you do today doesn’t mean that it’s set in stone. In the situation at hand, if down the road my client’s relationships with his two children changes he can always change his estate planning documents. That is why I always tell people it’s important that every year or so you review your estate planning documents to make sure they still reflect your wishes.

When it comes to deciding beneficiaries, don’t let anyone tell you what you should do. You should do what you believe is right for your individual situation. If you do that, then you will make the right decision.

Good luck!
Rick is a fee-only financial advisor. His website is If you would like Rick to respond to your questions, please email Rick at -.