Ways to disinherit a child that cannot be challenged in court

Thank you to the readers of this column for their patient suffering through five columns in a row about how to obtain an estate grant.

I’ll conclude that topic with a brief kudos to the folks at the Kelowna Court Registry. They issued estate grants on three of my last four applications in 3 ½ weeks which is an incredibly fast turnaround.

Next up is a follow through to a commitment I made months ago, at the end of a four-column series about disinherited children contesting a will.

Thank you to Wayne in Victoria, who reminded me of this commitment at the end of my column published Aug. 11, 2024.

“There are ways to completely sidestep a child’s ability to challenge the way you choose to pass on your wealth, even if everything points to a strong moral duty to that child. I feel it’s time to leave the unpleasant topic of disinheriting children for a while though, and will cover those ways at some point in the future,” I wrote back in August.

I invite you to read the four-column series if you’re interested in this subject. If you have any difficulty accessing the columns, let me know and I’ll help you.

Put simply, the way to sidestep your disinherited child’s right is to structure your assets so you won’t have an estate.

I’ve written about what it means not to have an estate in previous columns, but it can be tricky to get your head around that, so I’m happy to explain it again.

My August 18, 2024 column explained it in the context of not having to pay estate debts.

An important difference is that taking steps to structure your assets for the purpose of stiffing your creditors is unlawful under British Columbia’s Fraudulent Conveyance Act. It’s not unlawful to take those same steps for the purpose of disinheriting your child.

Jointly owned assets

When assets are owned jointly by two or more people and one of them dies, the deceased ceases to have any interest in the asset, leaving the survivor(s) as the owners.

Those assets do not form part of the estate.

This assumes the asset is owned in true joint tenancy, which includes the “right of survivorship” (the right of the surviving joint tenant to own the entirety of the asset on the other’s death). That’s important, because there are different types of joint tenancy.

If you have two children and want to disinherit one of them, you might transfer title to your house from your name alone to be held in joint tenancy with your favoured child. But if no money changes hands, there is a legal presumption that the favoured child doesn’t have the right of survivorship and will hold the asset in trust for your estate. That presumption can be overcome if you simply “paper” your intentions at the time the asset is transferred. But it must be done properly.

Registered assets

I am referring to Registered Retirement Savings Plans (RRSPs) and the other registered assets (RRIFs, TFSAs, LIRAs and LIFs) that allow for a beneficiary to be named.

If you don’t name a beneficiary, the proceeds of those assets get paid into your estate. If you do name a beneficiary, the proceeds are paid to your named beneficiary and do not form part of your estate. You can name your favoured child as beneficiary, excluding the one you want to disinherit.

Transfer before you die

Assets transferred out of your name and out of your possession while you’re alive do not form part of your estate and therefore cannot be included in a will variation claim.

A trust

A trust is a legal arrangement where you transfer ownership of assets to a trustee to manage those assets for the benefit of a beneficiary. There is a cool type of trust available to those aged 65 and older called an “alter ego” trust (an extension of yourself), where you get to be both the trustee and th beneficiary while you are alive. You also include provisions in the trust about who gets your assets on your death, the same as you would in a will. There is a version for couples called a “joint partner” or “joint spousal” trust that works in a similar way.

Assets in a trust don’t form part of your estate and therefore cannot be included in a will variation claim.

A trust is typically the best option for sidestepping a disinherited child’s claim but it comes with some expense to set up and maintain.

Each of these options prevent assets from forming part of your estate. If there’s no estate, your will is meaningless and your child’s right to challenge that will becomes meaningless as well.

Please get legal advice if you want to disinherit a child. My columns are not legal advice. I provide legal information which can lead you astray if you take steps without having a proper consultation with a lawyer.

I’ve been writing this column for more than14 months and I’m nowhere near running out of material but I welcome your questions because it’s more fun writing a column around an actual reader question.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.