No one wants to draft a will or trust leaving assets to beneficiaries only to have one of them sue the estate or trust. Unfortunately, there is no surefire way to prevent someone from contesting a will or trust, but a no-contest clause can minimize the risk of litigation. While this is not the only way to deter lawsuits, it is a good backup provision to include in your estate plan when the other tactics fail to resolve disputes.
What Is a No-Contest or In Terrorem Clause?
A no-contest clause states that in the event a beneficiary challenges a will and is unsuccessful, they forfeit any benefit they would have received under the will. The rationale behind the provision is that a beneficiary who has little chance of winning will think twice about suing if an in terrorem clause exists and they will inherit nothing if they lose the case.
Importantly, the beneficiary must receive something in the will in order for the clause to work. If the beneficiary is completely disinherited, there is no disincentive to suing because they are not losing anything of value by contesting the will.
How Is the No-Contest Clause Enforced?
If a beneficiary challenges a will with a no-contest clause, the executor must inform the court of the existence of the clause. Then, if and when the challenger is unsuccessful, the executor will file a motion with the court to exclude the beneficiary from receiving anything he or she was entitled to under the will pursuant to the clause. For example, let’s say a beneficiary who was to receive $1 million in the will decides to contest it because his siblings each got $5 million. If the beneficiary loses the case, and an in terrorem clause exists in the will, the court may determine that the beneficiary has forfeitedt the $1 million.
Are No-Contest Clauses Effective at Deterring Litigation?
Courts have enforced in terrorem clauses, denying beneficiaries their inheritance if they unsuccessfully sued. However, more often, will contests are settled out of court rather than resolved as a result of litigation. Practically speaking, this means that even though a no-contest clause exists, if the executor and the remaining beneficiaries reach an agreement, the executor will be prevented from withholding the inheritance from the beneficiary as stated in the will.
Do You Need a No-Contest Provision in Your Will?
When drafting your will, be sure to consult with an experienced attorney who can advise you on whether or not an in terrorem clause makes sense for you. Our estate planning attorneys work closely with clients to develop a comprehensive plan tailored to their situation including taking into account the risks of litigation. Contact us for a consultation to learn how we can help you.