What Is It?
Disinheritance occurs when you fail to give any property under your will to an individual who would have received a share of your property if you died without a will. While the idea of disinheriting an heir brings to mind family arguments over who gets the family fortune, there are other reasons why you may not want to leave property to a family member. It could be that your second spouse is financially well off and you wish to make sure that your children from your previous marriage are provided for.
Maybe you have one child who is a successful doctor while the other is a single parent who barely manages to pay his or her bills, or it may just be that you are fighting with a family member and do not want to leave him or her anything. Whatever the reason, for our Lockheed Martin clients who are considering disinheriting an heir, there are certain steps you should take to be sure that their wish to disinherit an heir is properly carried out at their death.
Tip: You may want to consider disinheritance if an heir has a problem with creditors. Disinheritance prevents your heir's inheritance from ending up with his or her creditors since creditors cannot take what your heir does not own.
How Do You Disinherit Someone?
In General
While you can easily 'disinherit' a non-heir by not mentioning him or her in your will, it's important that these Lockheed Martin clients know that the rules are more complicated when it comes to your heirs. Merely not mentioning the name of a child or spouse in your will might not disinherit him or her and doing so can even open the door for will contests. In a will contest, the heir who is left out of the will could argue that he or she was mistakenly left out or overlooked. The outcome of a will contest depends in part upon your state's law regarding an omitted (referred to as 'pretermitted') spouse or child.
To be sure that your intent to disinherit an heir is unequivocal, these Lockheed Martin employees should consider including a disinheritance clause in their will. Such a clause can discourage the disinherited heir from contesting your will by claiming that you mistakenly left him or her out. This clause would indicate the exact name of the heir you wish to disinherit and explicitly state that the reason he or she is not included is that you wish to disinherit him or her. A sample disinheritance clause can be read as follows:
Example(s): 'In this will, I intentionally do not leave anything to John Doe, who is my son, because he is already provided for.'
These Lockheed Martin employees should consult their attorney if they are considering disinheriting an heir.
Tip: Do not include any detailed explanations in your will concerning why you are disinheriting your heir. A particularly negative explanation can give your heir cause to sue your estate for libel. If you wish to explain the disinheritance to your heir, leave a separate written statement with your executor.
Disinheriting a Spouse
In General
In most states, you cannot disinherit your spouse completely. If you live in a community property state, your spouse automatically owns one-half of the community property, which generally includes what either of you acquired during your marriage. In all states, spouses are protected from disinheritance by allowing a spouse to claim his or her statutory share, also known as 'electing against the will.' A statutory share can run anywhere from one-quarter to one-half of an estate, regardless of the terms of the will.
Example(s): Bob's will leaves all of his property, totaling $1 million, to his secretary, Paula, and nothing to his wife of 30 years, Sharon. If Sharon is content with no inheritance, the court will honor the terms of Bob's will. However, if Sharon wants to contest the will, she can claim her statutory share, which will be anywhere from one-quarter to one-half of the $1 million that Bob left to Paula. Paula will receive what is left after Sharon receives her statutory share.
Pretermitted Spouse
The pretermitted spouse statute protects the surviving spouse of a marriage that was not contemplated by the testator during the execution of the testator's will. In many states, marriage revokes a will, and the testator's property passes by intestacy as opposed to under a will executed before marriage. In states where marriage does not revoke a will, the statute commonly provides that the pretermitted spouse is to receive the share that he or she would have received had the testator died intestate. However, a surviving spouse may not be allowed to take under the pretermitted spouse statute if:
- It appears that the will was made in contemplation of the testator's marriage to the surviving spouse (e.g., it is stated in the will)
- The will expresses the intention that it is to be effective notwithstanding a subsequent marriage by the testator, or
- The testator provided for the spouse in a transfer that was outside of the will, with the intent that the transfer be in lieu of a testamentary provision, which is shown by the testator's statements or is reasonably inferred from the amount of the transfer
Example(s): John executes a will prior to marrying his wife, Joan. Assume that they both live in a state where marriage does not revoke a will. John dies without ever updating his will to include Joan. Joan could argue that she is a pretermitted spouse, since John did not contemplate the marriage when he executed his will. As a pretermitted spouse, Joan would be entitled to receive what she would have received had John died intestate (without a will). However, when Joan goes to court to contest John's will, the court could rule that Joan is not a pretermitted spouse if John's will contained a clause that expresses John's intent that the will was to be effective notwithstanding a subsequent marriage.
Tip: These clauses are sometimes viewed as against public policy.
Tip: For any Lockheed Martin employees who want more information, see Uniform Probate Code section 2-301, which is the law in some states but not all.
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Disinheriting a Child
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In General
While you have the right to disinherit a child, that right is severely restricted by laws that grant certain inheritance rights to minors and protect children of any age from accidental disinheritance. In the case of accidental disinheritance, a child can claim that he or she is a pretermitted child. Some states allow only a child who is born or adopted after the will was executed to receive an inheritance (take) as a pretermitted child. Other states allow a child who is born or adopted either before or after the will is executed to take as a pretermitted child. In either case, a pretermitted child is generally entitled to receive what he or she would have received had the decedent died intestate.
Example(s): John, a resident of State X, has a son named Jack. John later executes a will that leaves nothing to Jack. State X allows only children who are born or adopted after the will was executed to take as a pretermitted child. When John dies, Jack argues that he was accidentally left out of John's will and that he wishes to take as a pretermitted child. However, since Jack was born before the will was executed, he is not entitled to take as a pretermitted child.
Example(s): As another example, John, a resident of State Y, has a son named Jack. John later executes a will that leaves nothing to Jack. State Y allows children who are born or adopted either before or after a will was executed to take as a pretermitted child. When John dies, Jack argues that he was accidentally left out of John's will and that he wishes to take as a pretermitted child. Even though Jack was born before the will was executed, he is entitled to take as a pretermitted child. He receives what he would have received if John died intestate.
Are There Any Alternatives to Disinheritance?
If the reason you want to disinherit someone is that you think they might squander their money, you may want to consider leaving that person an inheritance trust. When you die, the money you leave to your beneficiary in an inheritance trust will pass directly to the trustee. The trustee then manages the money and pays your beneficiary the income. You can even include a motivation provision in the trust document. This provision allows the trustee to terminate the trust and give your beneficiary his or her share of the inheritance outright, as long as your beneficiary proves to the trustee that he or she no longer has a problem managing money.
Revising Your Will to Include a Disinheritance Clause
In General
One method of revising your will is to add a codicil, which revokes part of your will or adds a provision. However, since a codicil must be written, dated, signed, and witnessed, it may be just as easy to execute a new will. We'd like to remind these Lockheed Martin employees that when you execute a new will, you must be sure to properly revoke your old one. This can be done by including in your new will the following statement:
Example(s): 'I revoke all wills and codicils that I have previously made.'
How does Lockheed Martin determine the monthly pension benefit for employees nearing retirement, and what factors should employees consider when planning their retirement based on this calculation? Specifically, how do the concepts of "Final Average Pay" and "Credited Years of Service" interact in the pension calculation under Lockheed Martin’s retirement plan?
Lockheed Martin Pension Calculation: Lockheed Martin calculates monthly pension benefits using the "Final Average Pay" (FAP) and "Credited Years of Service" (CYS). The FAP is determined by averaging the three highest annual compensations prior to 2016, while CYS counts the years from employment start to December 31, 2019, when the pension was frozen. The benefit per year of service is calculated based on whether the FAP is less than or exceeds the Social Security Covered Compensation, with specific formulas applied for each scenario. These calculations directly affect the monthly pension benefit, which may also be reduced if retirement commences before a certain age due to early retirement penalties.
Given the recent changes in Lockheed Martin's pension policy, what implications could this have for employees who are planning to retire in the near future? How should these employees navigate their expectations regarding retirement income given that the pension has been frozen since 2020?
Implications of Pension Freeze: Since Lockheed Martin froze its pension plan in 2020, no future earnings or years of service will increase pension benefits. This freeze shifts the emphasis towards maximizing contributions to 401(k) plans, where Lockheed Martin increased its maximum contribution to 10% for non-represented employees. Employees planning for imminent retirement should recalibrate their financial planning to account for this change, prioritizing 401(k) growth and other retirement savings vehicles to compensate for the pension freeze.
What options does Lockheed Martin provide for employees regarding healthcare insurance as they approach retirement age? How do these options compare in terms of coverage and cost, particularly for those who will transition to Medicare upon reaching age 65?
Healthcare Options Near Retirement: As Lockheed Martin employees approach retirement, they can choose from several health insurance options. Before Medicare eligibility, they may use COBRA, a Lockheed Martin retiree plan, or the ACA's private marketplace. Post-65, they transition to Medicare, with the possibility of additional coverage through Medicare Advantage or Medigap plans. Lockheed Martin supports this transition with a Health Reimbursement Arrangement, providing an annual credit to help cover medical expenses.
Understanding the complex nature of Lockheed Martin's pension and retirement benefits, what resources are available to employees to help them navigate their choices regarding pension claiming options? In what ways can the insights from these resources aid employees in making informed decisions about their financial future?
Resources for Navigating Retirement Benefits: Lockheed Martin employees have access to resources like the LM Employee Service Center intranet, which includes robust tools such as a pension estimator. This tool allows for modeling different retirement scenarios and understanding the impacts of various pension claiming options. Additional support is provided through HR consultations and detailed plan descriptions to ensure employees make informed decisions about their retirement strategies.
For employees with varying years of service at Lockheed Martin, how can their employment history impact their pension benefits? What strategies should individuals explore to maximize their benefits given the different legacy systems that might influence their retirement payout?
Impact of Employment History on Pension Benefits: The length and nature of an employee’s service at Lockheed Martin significantly influence pension calculations. Historical changes in pension policies, particularly the transition points of the pension freeze, play critical roles in determining the final pension benefits. Employees must consider their entire career timeline, including any represented or non-represented periods, to understand and maximize their eligible pension benefits fully.
How does the Lockheed Martin retirement plan ensure that benefits are preserved for spouses or dependents after an employee's passing? How do different claiming options affect the long-term financial security of the employee's family post-retirement?
Benefit Preservation for Dependents: Lockheed Martin's pension plan includes options that consider the welfare of spouses or dependents after an employee's passing. Options like "Joint and Survivor" ensure ongoing benefits for surviving spouses, while choices like "Life with X-Year guarantee" provide continued payments for a defined period after the employee’s death. Understanding these options helps secure long-term financial stability for beneficiaries.
What steps can Lockheed Martin employees take to prepare financially for retirement, especially if they have outstanding loans or financial obligations? How crucial is it for employees to understand the conditions under which these loans must be settled before retirement?
Financial Preparation for Retirement: Employees approaching retirement should focus on clearing any outstanding loans and maximizing their contributions to tax-advantaged accounts like 401(k)s and Health Savings Accounts (HSAs). These steps are crucial for ensuring a smooth financial transition to retirement, minimizing potential tax impacts, and maximizing available retirement income streams.
With the evolution of Lockheed Martin's retirement initiatives, particularly the shift toward higher 401(k) contributions, how should employees balance contributions to their 401(k) with their overall retirement savings strategy? What factors should they consider in optimizing their investment choices post-retirement?
Balancing 401(k) Contributions: With the pension freeze, Lockheed Martin employees should increasingly rely on 401(k) plans, where the company has increased its contribution cap. Employees must balance these contributions with other savings strategies and consider their investment choices carefully to ensure a robust retirement fund that can support their post-retirement life.
How does Lockheed Martin's approach to retirement planning include the management of health savings accounts (HSAs) for retirees? What are the tax advantages of HSAs, and how can employees effectively utilize this resource when planning for healthcare expenses in retirement?
Management of HSAs for Retirees: Lockheed Martin encourages maximizing contributions to Health Savings Accounts (HSAs), which offer significant tax advantages. These accounts not only provide funds for current medical expenses but can also be used tax-free for healthcare costs in retirement, making them a critical component of retirement health expense planning.
What is the best way for employees to contact Lockheed Martin regarding specifics or questions about their retirement benefits? What channels of communication are available, and how can they access the most current and relevant information regarding their retirement planning? These questions aim to encourage thoughtful consideration and discussion about retirement planning within Lockheed Martin, addressing various aspects of the company's benefits while promoting engagement with internal resources.
Contacting Lockheed Martin for Retirement Benefit Queries: Employees should direct specific inquiries about their retirement benefits to Lockheed Martin's HR department or consult the benefits Summary Plan Descriptions available through company resources. These channels ensure employees receive accurate and comprehensive information tailored to their individual circumstances.