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Financial Literacy - Planning for your heirs
Avoiding accidental disinheritance
It happened to Anna Nicole's daughter, and it's more common than you think.
Planning for your heirs

You can accidentally disinherit your heirs

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, Anna Nicole placed all of her assets in a trust and named her son Daniel by name (rather than by the more inclusive term "my issue") as sole beneficiary. When Daniel predeceased his mother, the trust legally lapsed for want of a living beneficiary, since Anna Nicole had failed to name a contingent beneficiary for Daniel. Then, because she failed to update her will to include Dannielynn before her own untimely demise at age 39, her sole surviving child was accidentally disinherited.

As a result, Anna Nicole's estate -- including the fortune she may someday be 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.
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 Anna Nicole's will, Dannielynn will likely be considered a pretermitted child that was accidentally disinherited, and thus will likely inherit the bulk of Anna Nicole's estate.

But had Anna Nicole had other children or stepchildren, Dannielynn's expected windfall would almost certainly have been challenged or shared.

Grave mistakes
Here's how you can accidentally disinherit your loved ones, and how you can prevent it.
7 ways to disinherit your kids:
1. Failure to update a will
2. Faulty will
3. Stepparent succession
4. Ademption
5. Misunderstanding survivorship
6. Mirror-image grant
7. Failure to prepare a will

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."

-- Posted: Nov. 19, 2007
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