The word “disinheritance” is loaded with emotion. It implies discord at best, and outright animosity at worst. It carries the weight of negativity in almost every instance. What if we were to consider it in a more pragmatic way, through the lens of estate planning? We may see a different picture.
Disinheriting someone does not necessarily mean they get nothing. It may be that the individual is being left out of the probate estate (assets passing through the Will), but that same individual may be the beneficiary of a life insurance policy or annuity contract, or even a valuable piece of art. However, the rules surrounding disinheritance of a spouse are somewhat different.
In Pennsylvania, as in many other states, a spouse may go so far as to leave everything to someone other than the surviving spouse. However, the surviving spouse has a legal right to demand a share of many assets – usually equal to one-third. There are complicated rules surrounding what is called the “elective share” calculation. With proper estate planning, limiting a spouse’s inheritance to the elective share can have some benefits.
Consider Bob and Mary, who have had a long and solid life together. Mary developed Alzheimer’s Disease and eventually needed care in a nursing facility. Mary qualified for Medical Assistance benefits. When Bob unexpectedly passed before Mary, she inherited everything. Those assets became available to pay for her care and were fully spent down, effectively leaving nothing for Bob and Mary’s children.
An experienced elder law attorney would have suggested to Bob that he create a Will to limit Mary’s inheritance to the “elective” or “spousal share”. The Will provides for payment to Mary of the amount required under the spousal share rules and also complies with the Medical Assistance policies. The other two-thirds of the estate may be left in a Special Needs Trust for Mary, allowing for a protected “pot” of money to be used for Mary’s benefit during her lifetime. The roughly two-thirds remaining in the Special Needs Trust will eventually pass to Bob and Mary’s children.
This is a complex planning technique and involves more than this article can cover. The take-away here should be this: There are ways to shelter assets from nursing home costs with the guidance of an experienced attorney. Benefits can be preserved, assets can be protected, and “disinheritance” can sometimes be seen in a more positive light.