Friday, March 13, 2015

Use a “No-contest” Clause to Avoid Fights over your Estate

One of the fundamental goals of estate planning is to limit the potential for disputes and hard feelings among your heirs after your death. But so-called “will contests” (and “trust contests”) seem to be getting more frequent these days.

Disputes over the post-mortem disposition of your property can arise for many reasons. Perhaps your children just don’t get along. Or you left more to one child than another. Or there is conflict between your spouse and your children from a prior marriage. Or a family member feels that they were denied “their rightful inheritance” because you gave part of your estate to a friend or a charity.

I recall representing an estate where the decedent was gay, and his siblings were very upset that he left a large bequest to his life partner. The siblings lost, but not until after a court battle.

Our increasing longevity may feed into the growing prevalence of will contests. Age related losses in mental acuity (“lack of capacity”) and the potential outsized influence of a child who serves as primary caregiver (“undue influence”) are factors in many will contests.

How Does a No-contest Clause Work?

One way to limit the potential for a will (or trust) contest is to include a clause in your estate planning documents that says that an heir who challenges your Will or Trust and loses gets nothing. This clause is commonly called a “no-contest” or “forfeiture” provision, although lawyers sometimes refer to it as an in terrorem clause.

Most (but not all) states permit you to include a no-contest provision in your Will. Pennsylvania has a statute allowing it: See 20 Pa.C.S. §2521.

Pennsylvania law, like that of many states, specifies that forfeiture will not take place if there was “probable cause” for the will contest. While there is no settled definition of what constitutes probable cause, the term basically means that there was a good reason for the contest. Probable cause justification for a contest may be found even in situations where the Will is ultimately upheld.

Don’t Totally Disinherit.

A no-contest clause can protect your estate from vexatious lawsuits from a disappointed heir. But it only works if the heir has something to lose.  If an heir is completely disinherited, there is nothing to be forfeited. So, if you use a no contest provision you will want to leave your disfavored heirs enough money or property to make them hesitate before seeking to invalidate your Will. 

Other Strategies to Avoid a Will Contest.

A no-contest clause is just one of the strategies that can be used to avoid litigation over your estate. Your lawyer may recommend steps to limit the potential for lack of capacity and undue influence claims – e.g. doctor’s exams, videotaped wills and excluding children from estate planning meetings. 

Be sure to tell your lawyer if you think that there is a chance that someone may dispute the dispositions you intend to make in your Will or Trust. Together you can come up with the best ways to ensure that your estate plan does not include a legacy of anger and litigation.   

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