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On money

Personal Finance editor
huntley

HELEN
HUNTLEY

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By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times
published August 11, 2002


Parents not obligated to leave estate to children

Q. What is the process for disinheriting a child? I think my husband's father is disinheriting him, and I want to be prepared for that possibility when the time comes.

A. Your father-in-law doesn't have to leave his children a dime. All he has to do is create a will or trust leaving his property to someone else. Children born after a will or trust is created are presumed to have been left out unintentionally, but we can safely assume this does not apply to your husband.

Your father-in-law might mention your husband, perhaps saying "I provided for my son during my lifetime" or leaving him a token bequest such as $1. However, this is not necessary.

Children who are left out sometimes challenge the validity of the will or trust, said St. Petersburg lawyer Wm. Fletcher Belcher, who often handles such cases. If the document is thrown out, that allows the estate to be distributed according to an earlier will, if one was executed, or according to state law for people who die with no will.

"Ninety-nine percent of challenges are based on a claim of undue influence or a lack of mental capacity or that the document was not duly executed in accordance with formalities required by law," Belcher said.

For example, if your father-in-law leaves all the money to his housekeeper, there might be grounds to claim the will was signed under undue influence. If he is suffering from dementia, there might be grounds to claim he lacked the mental capacity to sign. However, this is a tricky area because even people who have deteriorated mentally still can have lucid moments. You would need to consult a lawyer to pursue a challenge.

Belcher said the majority of will contests pit siblings against each other or children against a stepparent.

* * *

Q. I purchased two government bonds through my bank in 1992. At that time the interest rate was 6 percent, and I thought I would be able to redeem them in 10 years at their face value of $5,000. Recently I checked with the bank, and they said the redemption value was $4,384 and that to get full maturity I would have to wait another eight years. Are the bank officials correct?

A. No. The bonds you bought were EE U.S. savings bonds, which sell for half their face value. Although savings bonds appear to be very simple investments, they actually are quite complex because the Treasury keeps changing the rules and the interest rates. In addition, the term "maturity" doesn't mean quite the same thing when it is applied to savings bonds as it does when it is applied to other types of bonds.

Normally, bond investors think of "maturity" as the date a bond stops paying interest and can be redeemed at face value. Savings bonds have an "original maturity," defined as the maximum number of years it could take them to be worth their face value. The savings bonds rules in effect when you buy a bond apply to this period. Your bond had an original maturity of 12 years. Newly-issued bonds have an original maturity of 17 years.

Once the bond's original maturity is reached, bonds enter one or more "extended maturity" periods, which usually last 10 years. The rules in effect at the beginning of each period apply until it is over. Then there is "final maturity," when the bond stops earning interest, usually 30 years after it was issued.

What makes things extra confusing is that the savings bond interest rate changes every six months, but minimum guaranteed interest rates apply to some bonds, including yours.

If you don't need the money, I recommend hanging onto the bonds at least until the 12 years is up because your bonds are earning a guaranteed minimum interest rate of 6 percent. You can check the value of your bonds on the savings bond Web site (www.savingsbonds.gov).

Online money map

Want to learn more about real estate investment trusts? The National Association of Real Estate Investment Trusts (www.investinreits.com) has created a site with you in mind.

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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