Ask an advisor: My client wants to disinherit their adopted children. What should I say?

June 13, 2024 5:09 PM

A financial advisor in Idaho wonders what to do after his client decided to write their adopted children out of their will.

Welcome back to "Ask an Advisor," the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.

The job of a wealth manager is to advise clients on their finances, not their morals. But what if an investor plans to do something the advisor finds ethically objectionable — and they want the advisor's help doing it?

This kind of dilemma is particularly common in estate planning, as clients decide who inherits what. Is it right for a father's second family to receive more than his first? Or for a pet to receive more than a human grandchild? Either way, the advisor's job is to advise, not to judge.

As one wealth manager in Idaho is finding out, that's easier said than done. In his case, a client has decided to leave an inheritance for their biological children — but not for their adopted ones.

At first glance, this choice struck the advisor as inexplicable. But were there reasons — either moral, personal or financial — that he wasn't aware of? What should he ask his client? And as their advisor, how should he guide and inform their decision?

These are not easy questions. For help, he turned to his fellow advisors. Here's what he wrote:

Dear advisors,

We occasionally work with clients who have both biological and adopted children, which can get complicated when it comes to estate planning. Some parents prefer to divide their assets equally between all their kids, but others leave everything to their biological children and exclude their adopted ones altogether.

My first question is, why would any parent do this? But secondly, how should a financial advisor handle this discussion? If the clients aren't sure how to divide their assets between their biological and adopted descendants, what are some good questions to ask to help them make a decision? How would you handle it?

Sincerely,

Idunno in Idaho

And here's what financial advisors wrote back:

Ask the tough questions

Noah Damsky, chartered financial analyst and founder of

Marina Wealth Advisors

in Los Angeles

There is no right or wrong in this situation; it boils down to emotions and values.

I think a parent would do this if they view their biological and adopted children differently. It sounds like they may prioritize biological children, which is a shame because I've heard from adopted children that one of their greatest insecurities is that their adopted parents love them less because they're not biological. While I'd like to tell them it's not true, actions such as leaving them out of an inheritance because they're adopted make me pause for thought.

I would begin by asking the parents if they view the kids as equals. Maybe they know they prioritize their biological kids, so now it's not about the financial advisor clarifying the clients' thinking, whether we think they're right or wrong. In the end, it's about raising their awareness and exposing potential blindspots in their thinking, not guiding them to a particular decision.

If adopted kids are excluded from an inheritance for this reason, it will surely affect them financially, but maybe even worse emotionally, perhaps reopening wounds they treated decades ago. This can cause a domino effect of emotional distress.

There may be financial reasons

Tricia Rosen, certified financial planner and principal at

Access Financial Planning

in Boston

As a parent of both biological and adopted children myself, I cannot imagine treating my children differently based solely on how they came to be part of my family. However, there may be mitigating circumstances where treating the children differently for estate planning purposes may be the best choice for the family for various reasons.

For example, my youngest son has a disability, and therefore any assets he receives from a third party would go to his special needs trust. This is required so the inherited assets don't cause unwanted complications with his financial needs-based support programs.

I have also seen a situation where an adopted adult son was unstable emotionally, and the parents didn't want the son to inherit any assets because they would only create more problems for him.

The circumstances around estate planning can get complicated for many families, regardless of how the family was formed. I would suggest the important criteria when making estate planning recommendations are the family dynamics, needs, values and priorities, and how the family was formed in the first place is not a variable that drives a decision by itself.

Don't jump to conclusions

Laura Cook, CFP and founder of

Flourish Financial Life Planning

in Anderson, South Carolina

As a family touched by adoption, it is hard to understand why this would be an issue, but I'm trying to think outside the box and see this from someone else's experience.

A few questions I would ask the parents:

What is the family dynamic right now? Is the adopted child still engaged with the adopted family? Have they gone back to their biological family for some reason? Will the child inherit money from another source at some point? These would be my first questions to understand what is going on in the relationships before I jump to conclusions or make unfair judgments about the parents.

Are the adopted child's biological parents or siblings still alive? If so, are there concerns that the adopted child would feel obligated to help them financially if they were to inherit money? If this is a concern, the advisor could discuss ways to protect the adopted child's inheritance and get an attorney involved to draft the right documents.

Is there a history of alcoholism or substance abuse or other behaviors in the biological family that you fear may repeat in the adopted child? Again, there are ways to protect the funds for the child without them becoming a detriment.

If the parents are fully committed to not considering the adopted child as a full recipient of inheritance, I think it's important to express this in a family meeting when all of the children are old enough to handle this information. In this way, the adopted parents get to state their reasoning and it is not left to the siblings to explain to the adopted child, hopefully preserving the relationships between the siblings.

Don't forget the siblings

Robin Hovis, financial advisor at

LPL Financial

in Millersburg, Ohio

How I would respond depends on which of the following two scenarios present themselves:

1. The parents have made up their minds on excluding their adopted children from inheriting their assets and do not ask my views.

In this scenario, I would enter the beneficiaries on their accounts as they instruct and keep my opinions to myself, even though I would neither understand nor agree with their action. It is their money, and their children, and their decision.

2. The parents tell me they have been struggling with deciding how to allocate their assets among their biological and adopted children, and they ask my advice.

My response would be that when they adopted a child, the child became their child in the eyes of the law, in the eyes of society and in the eyes of the child.

Assuming they have been telling their adopted children all along that they love them just as much as they love their biological children, then to disinherit the adopted children or leave them a lesser amount would completely undermine all their previous declarations of unqualified love. It would be a crushing emotional blow to the adopted children — not so much because of the money, but because of the clear statement being made.

It would also likely affect how the biological children would now view their deceased parents, upon learning that their adopted siblings have been disinherited simply because they were adopted. Some of the biological children might see nothing wrong with this situation, and even be pleased that they are inheriting more. But others will be quite embarrassed and will be placed in a very awkward situation regarding their future relationship with their adopted siblings.

What we do with our money makes a clearer statement about our values than what we say.