It is your money, and the laws of all 50 states provide great deference to people’s wishes when passing on their estate. Provided your Will or Trust does not contain inheritance provisions that violate public policy, the Court will not interfere with your wishes. But what if your estate plan is not consistent with your true intentions? Or contains conditions that violate the law? In these cases, your beneficiaries and heirs have the ability to contest the written documents and ask the court to have them declared invalid, or seek to reform them in a way consistent with your intent and the law.
Why it Exists
This can create tension in the system. Heirs disinherited for legitimate reasons may seek to challenge your wishes simply because they disagree with them. They file a lawsuit in the hopes of persuading the court to change your legitimate wishes so they can obtain a greater portion of your estate. Even if unsuccessful, the lawsuit takes months or years to be resolved, and estate assets that you wanted to be passed to others are now being used to pay legal fees and court costs. While the case is pending, your legitimate beneficiaries are unable to receive their inheritance, and when they eventually do, it is less than what was intended for them.
Legal Standard
Enter the “No Contest Clause.” The majority of states, including California and Hawai’i, recognize the validity of a no contest clause used in your Will or Trust. Under Hawaii Revised Statute § 560:3-905, a person attempting to challenge a testamentary document without probable can be disinherited entirely if that challenge is made without probable cause. In other words, in the absence of a reasonable belief that the court may find their challenge legitimate, a beneficiary may be completely excluded from receiving any inheritance. California Probate Code § 21310 applies the same “probable cause” standard.
Application in Practice
How does this work in practice? Assume you have several children you wish to provide for in your Will or Trust. One of those children has been adequately provided for during his/her lifetime, and you would like to see a larger share of your estate pass to the other children. Rather than providing for an equal split among your kids, you provide for most of your estate to be split equally between the two children who have received less from you during your life time, and a smaller portion to be passed to the child who has already benefited from gifts and support during your lifetime. If that child now attempts to mount a legal challenge to receive a full third of your estate, they risk losing anything that you have designated for them. They become completely disinherited.
The use of no contest clauses has also grown in prevalence with the rise of blended families. Many times, individuals enter second marriages with significant separate property. Over time assets become comingled, and the line between community property and separate property becomes blurred. If one of the members of the marriage wants some protection that the property they brought into the marriage will be passed to his or her children, and not to his or her spouse or their heirs, a no contest clause can be a useful tool. It allows the surviving spouse a choice between acquiescing to the decedent spouse’s estate plan and forfeiting amounts that are now in question, or receiving what was agreed upon at some earlier point in the marriage.
Must be Well Written to Be Effective
To be effective, a no contest clause must be well written. First, if you offer no inheritance, then the disinherited heir has little incentive not to contest the Will or Trust. They risk losing their own legal fees and costs in an unsuccessful lawsuit, and if their claims are frivolous enough, may even be held responsible for the legal fees incurred by the estate in defending the claim. Second, the clause must be written specifically to adhere to the law. As noted above, California law on the no contest clause has changed. If your Will or Trust contains a no contest clause and was written before 2010, it may not be legally enforceable as you had planned.
A no contest clause forces dissatisfied beneficiary to make a choice: take the amount of inheritance provided, or risk losing everything. No contest clauses are enforced by the courts as a matter of public policy. They discourage frivolous litigation and honors the expressed intent of the testator.
Conversely, if you are a beneficiary or heir and subject to what you feel is a harsh result, the existence of a no contest clause should not dissuade you from bringing a legitimate claim. The enforceability of the clause only exists if a claim is brought without probable cause. Moreover, it only applies to certain “direct contests,” and not all challenges. If you have a legitimate claim, one supported by probable cause, you should not be discouraged by the existence of a no contest clause from seeking what was meant for you.
Takeaway
Whether you are a Trustee or Personal Representative who is aware of a potential dispute because of the existence of a no contest clause in a testamentary document, or you are an heir or beneficiary who wants to better understand your rights and options, Contact CASHMAN LAW today for a free consultation to see how we might help.
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