FORBES Magazine online blog, The Best Revenge – by Ashlea Ebeling, has an excellent article called 10 Ways to Lawsuit Proof Your Estate that covers a lot of the advice that we at Ainer & Fraker, LLP give to our clients.
Please read the entire article by clicking on the following link: 10 Ways to Lawsuit-Proof Your Estate.
Today, we’ll examine Part 9 – Include a “no contest” clause
“No contest clauses, also known as “in terrorem” clauses are generally valid and are an effective tool in preventing estate fights, especially if there is intrigue to start. A typical clause says that if any beneficiary of the will contests the validity of the will or any provision of the will, he of she forfeits his interest. You must leave something of value to the folks you expect to stir up trouble to make it work.”
Ainer & Fraker, LLP Analysis
No Contest Clauses can be very effective in deterring an estate fight, but they must be used with caution.
In some cases, they can be used to cut both ways – helping someone take money from an estate improperly.
In one estate we are familiar with, a distant relative of Mom & Dad convinced Mom & Dad to leave 80% of the estate to them, instead of to son. Son and Grandchildren were left only 20% of the Estate.
Son believed that this was a result of undue influence, but risked triggering the No Contest Clause if he did not prevail.
Due to recent changes in the No Contest Clause law in California, the bar to successfully challenge based on undue influence (or other direct contests) has been raised.
California’s No Contest Clause, found in Probate Code Section 21310-21315, makes it very difficult to file a direct contest without “probable cause.”
Typical of the Legislature, no precise definition of Probable Cause is provided in the Probate Code.
Absent clear guidance from the Courts, it remains difficult to determine which challenges will be found to trigger a No Contest Clause, and which will not.
Competent legal counsel should always be consulted before considering the use of No Contest Clauses in Estate Planning.