We live in a litigious society! Unfortunately, even family members sometimes file lawsuits because they are dissatisfied with what their parents or loved ones leave them in a will or trust. Some are so disgruntled that they decide to contest, or challenge, the validity of a will or trust, which delays the trust's or estate's administration for years resulting in thousands of dollars in legal fees. If you are concerned that any of your beneficiaries may seek to challenge your will or trust, a no-contest clause might be one method you can use to discourage them from pursuing this course of action.
What Is a No-Contest Clause?
A typical no-contest clause provides that a beneficiary who disputes the validity of a will or trust will forfeit any inheritance or benefit they otherwise would have received according to its terms. It will not prevent someone who is not a beneficiary named in your will or trust from contesting it though.
Are They Enforceable?
State law varies regarding the enforceability of no-contest clauses. They are unenforceable in only one state: Florida! In other states, no-contest clauses are enforceable unless (1) “probable cause” exists to institute a lawsuit challenging the validity of the will or trust, (2) the contest is based on “good faith, ” or (3) the contest is based on both probable cause and good faith. Still other states enforce no-contest clauses without regard to probable cause or good faith.
What Are the Pros and Cons of a No-Contest Clause?
These types of clauses have some advantages, as well as some disadvantages.
Pros of a no-contest clause
- Honors your right to give your property to the parties you have chosen in the way you want, as expressed in your will or trust
- Discourages baseless challenges to a will or trust by a disgruntled beneficiary
- Discourages meritless lawsuits aimed at forcing a settlement by a dissatisfied beneficiary
- Avoids lengthy and expensive litigation that will deplete your estate and delay administration
Cons of non-contest clause
- Causes a beneficiary to suffer a forfeiture of his or her inheritance for enforcing his or her right to challenge the will's validity
- Impedes the court's ability to determine if the will or trust is valid and ensure that it was not executed as a result of unlawful means, such as when an unscrupulous child convinces an elderly parent to sign a new will that is more beneficial to that child
What Legal Actions Will Be Considered a Contest?
A lawsuit that challenges the validity of a will or trust, or some of its terms, based on allegations of forgery, lack of due execution, lack of capacity, or menace, duress, fraud, or undue influence is typically considered to be a contest. However, under some circumstances, a will or trust could be considered to have been contested even if the beneficiary does not assert that it is invalid. This is generally when the beneficiary files a lawsuit that affects or changes the way money or property is distributed. In addition, the beneficiary may prevent the will or trust from being administered according to its terms by challenging the method by which assets were transferred into the name of the trust. Some courts have found that a no-contest clause has been violated even if a lawsuit contesting a will or trust is later withdrawn!
What Legal Actions Will Not Be Considered a Contest?
Although state laws vary, certain types of lawsuits are typically not considered to be a contest of a will or trust. Such lawsuits include those brought to ask the court to interpret or construe the language of the will or trust or to determine whether a personal representative or trustee has acted consistently with the terms of the will or trust. In addition, in some states, beneficiaries are allowed to first ask the court to determine whether a particular challenge would trigger the no-contest clause, and those actions are typically not considered a contest that would result in forfeiture of an inheritance for the beneficiary who filed the action.
What Are the Possible Outcomes of a Successful Will or Trust Contest?
The outcome of a will or trust contest depends upon several factors. If a will or trust is declared invalid and there is no earlier will, then the deceased person's money and property will be distributed according to state intestacy law, which specifies how it should be divided up and distributed when there is no will. When an earlier will exists, that document could take the place of the later one that is declared invalid. However, if only part of the will or trust is declared invalid, then the rest of the instrument will be upheld, which means the intestacy law will only apply to the assets addressed in the invalid portion of the will.
Let Us Help You Create an Estate Plan That Keeps the Peace
As the saying goes, the best defense is a good offense! If you see trouble brewing and are concerned that family members could contest your will or trust, a no-contest clause is one tool that could discourage dissatisfied beneficiaries from seeking to have it declared invalid. Another possibility that could forestall a will or trust contest is to conduct a family meeting during which you can explain your reasons for distributing your money and property in the way you have. Allow us to help you create the best estate plan for your unique circumstances and to employ all available tools to decrease possible conflict within the family once you pass away. Give us a call to set up a meeting. We are happy to meet with you via phone or video conference.