It seems as though a last will and testament would have no room for concessions, unfortunately, the countless drawn out legal cases between family members is proof that there’s always room for a challenge when one feels slighted. For most people, they know their final wishes will likely not settle well with some family members and in an effort of ensuring they don’t cause problems, they incorporate what’s known as a no contest clause. They’re ideal for keeping a lid on family problems, but then again, we’re dealing with the human condition. Peace and harmony within your family is important, but when it’s not possible, there are options. There are a lot of moving parts if you feel a no contest clause is necessary and as always, speaking with your estate planning attorney is the first best thing you can do to protect your assets.
The No Contest Clause
A no-contest clause is designed to discourage anyone wishing to challenge either a will or a trust. Typically, if the no contest clause is ignored, a forfeiture of anything he or she received in the will follows, leaving him (or her) with nothing. There’s a catch, though; in order for it 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 stamps worth $700 might be enough to justify a fight for more. On the other hand, the thought of losing, say, $40,000 in cash might be enough to prevent that person from going to court in order to get another $10,000 to match her siblings’ inheritance.
It’s a personal choice and one that serves a great purpose, but not for everyone.
State Laws Vary
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, a contest may be allowed without there being repercussions to anyone. This means your estate planning attorney needs to ensure there are no vulnerabilities in your no contest clause or your will.
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 your loved ones. Your wishes should be clear with no room for interpretations. 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 compelling reason to explore it often. Also, ever-changing tax laws, 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. Give us a call today to learn more.
- What You Need to Know to Protect Your Special Needs Child - May 30, 2023
- How Tax and Non-Tax Considerations Impact Estate Planning – Part I - May 25, 2023
- The IRS’ Annual Warning: The 2023 Dirty Dozen - May 23, 2023
