If you have an estate plan that includes one or more trusts, you probably feel certain that your wishes for the disposition of your assets will be respected and followed. If you work with an experienced estate planning advisor, this is usually a safe assumption. However, in some cases, heirs have been known to object to wills and trusts and to challenge them in court. Given this slim possibility, you may want to consider adding a “no-contest” clause to your estate planning documents.
Rules vary by jurisdiction
No-contest clauses generally are used to discourage heirs from making frivolous challenges that only create unnecessary expenses and delays for beneficiaries. These provisions disinherit any heir who contests a will or trust — typically on grounds of undue influence or lack of testamentary capacity.
However, not all states permit or enforce no-contest clauses. Most states do, but the rules governing such clauses may vary by jurisdiction, particularly when it comes to the definition of “contest.” For example, in some states, your heirs would be able to challenge the appointment of an executor or trustee without violating a no-contest clause. In other states where a no-contest clause generally is enforceable, courts might refuse to enforce the clause if a challenger has “probable cause” or some other defensible reason for contesting a will or trust.
Even if you live in a state where no-contest clauses are strictly unenforceable, it might still make sense to include one in your estate planning documents. It could provide protection if you move to another state that does enforce no-contest clauses or if you own property, such as real estate, in another state. Also think about establishing a trust that’s governed by the laws of another state where the clause is enforceable.
Minimize incentives
A no-contest clause can be a powerful deterrent, but it’s also important that your estate plan minimizes incentives to challenge it. Be sure to:
- Have a qualified physician or psychiatrist examine you at or near the time you sign your will or trust and attest in writing to your mental competence,
- Choose witnesses whom your heirs trust and whom you expect to be able to testify, if necessary, to your testamentary capacity and freedom from undue influence, and
- Record the execution of your will and other estate planning documents.
Also make an effort to treat your children and other family members fairly. If your plan contains any unusual terms — such as leaving the bulk of your estate to charity — meet with your family and explain the reasons for your decision. Keep in mind that if you leave out a child or other person who otherwise would inherit from you, a no-contest clause will be ineffective because that person has nothing to lose by challenging your plan. Instead, think about leaving family members enough to make them hesitate before they contest your plan and potentially receive nothing.
Protecting your wishes
You know your family and other potential heirs best. But if your estate planning advisor thinks a no-contest clause will help protect your will or trust, consider adding one.
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