In our last column, we talked about a couple who decided to use a "No Contest" clause in their wills and we committed to continue that conversation this week. A No Contest clause is a paragraph that can be included in a Last Will and Testament or a Trust, which makes it clear that anyone who challenges the validity of the document or the way it distributes or manages the assets of the estate will receive less than what the document would have otherwise allowed.
A sample No Contest clause might read something like: "If any beneficiary shall in any manner directly or indirectly, attempt to contest or oppose the validity of this Will (or Trust), including any codicils or amendments thereto, or commences or prosecutes any legal proceedings to set aside this Will (or Trust), then such beneficiary shall forfeit his or her share, shall cease to have any right or interest in my estate, and shall be deemed to have predeceased me."
To be clear, a will or trust is still valid without a No Contest provision, but as you can tell from the language of the provision, it is intended to deter those who think they are entitled to more of the estate than they will receive according to the estate documents. So, the easy answer to the question "why will a court enforce a No Contest clause" is "because that is what the person wanted."
Against that broad backdrop, though, there are a few limitations that courts have to consider when asked to enforce such a clause. Time and space won't allow us to describe enough detail to do justice to every limitation; however, one is worth exploring namely, whether there is "probable cause" to challenge the provisions of the will or trust. In simple terms, the court should not enforce language that violates the law or is against public policy, meaning it encourages behavior that we, as a society, do not want to encourage.
For instance, any provision of a will or trust that would result in discrimination or encourage dishonesty would likely be successfully challenged. A similar outcome might result if the language of a No Contest provision in a will or trust was inconsistent with other language in the estate plan.
However, for the most part, courts are required to let people determine how their estates are to be managed and to set the parameters of how they want their decisions enforced. If you are considering a decision as part of your estate plan that you think might not be popular with your heirs, then it would be wise for you to consult an estate planning professional and carefully weigh the options available to you. It may be that a No Contest provision is a perfect fit for your estate plan, or you may be advised that it would be better for you to handle the matter before your death instead of leaving it for your personal representative or trustee to handle without you.
We are unashamed proponents of such clauses because we are of the belief that heirs need to be reminded that they are not entitled to anything except what they are given. A few months back, we wrote a column entitled "Family Wealth: It's Not Their Money;" and while we don't believe the articles we write can be considered controversial, it is safe to say that article garnered the most attention of any that we have written.
At the risk of stirring the pot again, we reiterate that heirs who believe they have a right to dictate how their parents or grandparents spend, or give away, their money suffer from a sad, but all too common perspective.
We are now at the point that we start every meeting with clients reminding them that their property is theirs and that they have every right to handle that property without regard to the expectations of their heirs, especially their children.
Unfortunately, it appears about only half of the time do parents really believe us because about that often the children's' initial plan becomes the parents' final decision. It need not be that way, and a well-drafted No Contest provision can help ensure that end.
We discuss these and other estate planning matters in our no-cost seminars. Our next seminar is at 3 p.m. Wednesday, Sept. 11. Seating is limited to eight people, so that we can focus on the specific questions of a small group. If you are interested in attending the seminar, or if you have any questions about this article or topics you would like us to address in future columns, send an e-mail to admin@GJlawyer.com or call (970) 270-1213.
Brad Wright's business and estate planning practice includes transactional and litigation matters with a special focus on business succession. His brother, Steve Wright, has a similar law practice in Idaho Falls, Idaho and, together, they assist businesses of all sizes and types with a wide variety of legal issues.
© 2019 Brad R Wright, Steven J Wright