The American Declaration of Independence begins with the phrase, “We hold these truths to be self-evident, that all men are created equal…” While this statement may hold true for people and their rights, it certainly doesn’t apply to Trusts. In fact, seemingly small differences in wording can have significant impacts on a Trust’s outcome. One example is the presence—or absence—of a “No Contest” Clause.
A No Contest Clause is a powerful tool that discourages challenges to a Trust’s validity. It typically states that if someone unsuccessfully contests the Trust, they will face serious consequences, such as being disinherited or treated as though they predeceased the person who created the Trust. This clause can often prevent potential legal battles over your estate.
Let’s take a look at what happened when William met Rebecca. After hitting it off, they married, both for the second time. Each brought children into the relationship: Rebecca had an 11-year-old son, Andrew, while William had two daughters, Eden (13) and Esther (15). Rebecca came into the marriage with significant wealth, while William had more modest means. In her estate plan, Rebecca wanted to be fair, so she set up a Living Trust that split her assets equally among all three children.
Their marriage flourished for many decades, but after William passed away and then Rebecca several years later, Andrew—now in his 50s—decided he didn’t want to share his mother’s estate with his step-sisters. He contested Rebecca’s Trust, which resulted in a costly legal battle. The estate was depleted by hundreds of thousands of dollars in attorney fees, court costs, and expert fees. When all was said and done, the children were left with a much smaller inheritance than Rebecca intended. Worse yet, the emotional scars from the legal fight never healed, and the children are now estranged due to Andrew’s actions.
This painful situation could have been avoided if Rebecca had included a No Contest Clause in her Trust. Faced with the risk of losing his share, Andrew likely would have refrained from challenging the estate plan, saving the family from both financial loss and emotional turmoil.
A No Contest Clause can be especially useful in situations such as:
– Substantial wealth
– Remarriage, particularly later in life
– Unequal distribution among children
– Unusual or unexpected distributions
While No Contest Clauses are not enforceable in every state, they can be an effective tool in reducing the likelihood of your estate being contested. To ensure your wishes are honored and your family is protected from unnecessary strife, it’s essential to consult with an experienced estate planning attorney. A knowledgeable professional can guide you in crafting a plan that’s best suited for your unique circumstances.
From the desk of Attorney Brandon McGee
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