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Wednesday, June 22, 2011

How to Disinherit Your (Step)Children

It’s really simple. Do nothing and you will almost certainly make sure that none of your stepchildren will receive any benefit from your life insurance policies, your IRAs, your 401(k)s – nothing.

But, you say, I love my stepchildren, just like I love my biological children. I would never want to disinherit them. How could that possibly happen?

It’s actually quite easy, and quite common. Unless you legally adopt your stepchild, he or she normally has no legal right to any of your property. Most inheritance laws follow bloodlines, i.e., natural-born/biological children inherit. In the absence of specific guidelines, this is what will usually happen. If you want your stepchild to inherit (and/or your step grandchild), you have to make it so. Here’s how.

It is just as simple to ensure your stepchildren are in line for any inheritance as it is to lock them out. First, you could legally adopt them. Once adopted, that person shares the same legal status as a natural born child. However, maybe you do not want to adopt, or even more commonly, cannot adopt your stepchild. What do you do then?

Specifically name your stepchildren as beneficiaries. That’s it. All you have to do is name names and identify the sharing arrangement. For example, on your life insurance policy, list Susie Stepchild as a beneficiary. Do the same thing with your retirement plans and be sure to include Susie in your will. Now, you don’t have to worry about inadvertently disinheriting your stepchildren or their children.

Blog posting provided by:

Michael Snowdon, CFP ®

Michael is president of WealthRidge, a wealth management and financial planning firm, and is a professor emeritus of the College of Financial Planning. His focus in financial planning is to coach people in the process of meeting their goals and achieving their dreams.