In a perfect world, our wills would serve only to better the lives of our loved ones after we’re gone. There would be no hard feelings, no disbelief, anger or threats after heirs learn the contents of a will. Too many times, though, families split because of their inheritance (or lack of). A no contest clause is one way of limiting those battles, but there are a lot of moving parts you need to understand before including this clause in your estate plan.
A no-contest clause basically serves as a deterrent for anyone wishing to challenge either a will or a trust. That deterrent means a forfeiture of anything he or she received in the will if that person attempts to contest it. In order for a no contest clause to work, what you’ve left to that heir must be enough to dissuade him or her from risking the loss. For instance, leaving an heir your collection of commemorative plates that might be valued at $3,000 could be worth the risk of losing it. Leaving that same heir $25,000 in cash might not be worth the risk of losing it.
We encourage clients who are concerned about beneficiaries disrupting the process to consider adding a no contest clause. It’s a great tool for many, but these clauses may not serve a need for everyone.
There are varying compliance issues in the states that allow these clauses – and two states don’t recognize them – Indiana and Florida. In many jurisdictions, a judge will hear the contest and if it’s believed the will is vague or not in compliance, the heir may be allowed to contest it with no repercussions. This means it’s crucial to ensure there are no vulnerabilities in your no contest clause.
There have been instances in the past when an heir had simply tried to correct a typo or other error in the will and then lost their inheritance – even if they had nothing to gain by correcting the mistake. Be sure you’re very clear in what you leave whom.
Another important dynamic associated with the no contest clause is the potential an unhappy family member to ensure everyone else is unhappy, too. You might wish to address that so that there are no surprises when your will is read, even though it could result in the one who’s not going to be pleased with what he received to begin his campaign of demands and questions of why he’s not receiving what he feels he deserves. If it becomes too problematic, you will at least have the opportunity to change your will – either by increasing the complaining family’s inheritance or disinheriting him completely.
Remember, these are your assets that you’ve worked hard to build over the years. You’re not obligated to do anything you don’t want to do when it comes to dividing your estate.
Review Your Estate Plan
If you’ve not reviewed your estate plan recently, this is a great time to do so. With changing tax laws and the possibility of changes in your family, such as the birth of a new grandchild, you owe it to yourself to ensure it’s still in line with what you wished when the will and estate plan was put together. We can help walk you through the different clauses, trusts you might have put in place and insurance policies (especially important if your beneficiary is now a former spouse or is no longer living).