If you are drafting an estate plan and suspect that your beneficiaries may challenge your final wishes, you may consider adding a No Contest clause to your estate documents. But, is this the right decision for you and your loved ones?
No Contest Clause: Explained
A No Contest clause, also known as an In Terrorem Clause, is legal language that’s included in a person’s will or trust to discourage heirs from challenging the estate documents. In other words, with a No Contest clause, if a beneficiary tries to take action and either challenge or void the will, that beneficiary will be completely disinherited. They will no longer have any rights to the assets that were left to them in the will or trust. While a No Contest clause can be a persuasive deterrent, its application can be limited.
Challenging a Will or Trust – Probable Cause, Good Faith
If a beneficiary has probable cause to challenge a will or trust, then the court may not enforce the No Contest clause. Probable cause exists when the beneficiary has factual information that would lead a reasonable person to believe that they can prove their claim in court. Courts will typically not enforce the No Contest clause if the beneficiary is challenging the will or trust based on a factual basis, and in good faith.
Probable cause and good faith were the subjects of a recent Georgia case, Duncan vs. Rawls (2018), in which beneficiaries challenged a will that contained a No Contest clause. In 2012, Mrs. Goizetta authorized her children to act as her trustees and to make any changes to her trusts, as necessary. She also planned to leave monetary gifts for her staff and employees, but later amended her estate documents and removed the financial gifts altogether. Her will contained a No Contest clause. After Mrs. Goizetta passed away in 2015, her children still gave financial gifts to the staff and employees. But the beneficiaries challenged Mrs. Goizetta’s will, saying they were entitled to the full, original amount and arguing that the most recent will was invalid. The beneficiaries also asked the court to adopt an official good faith and probable cause exception to the enforcement of No Contest clauses. Ultimately, the trial court and Georgia Appeals court upheld the No Contest clause, and said that it’s the role of the Georgia Assembly, and not the judicial system, to create new policies. So, Georgia courts may not enforce the No Contest clause if the beneficiaries have probable cause, factual information and are acting in good faith – but the courts are not required to do so under Georgia law.
Other Challenges to a Will or Trust
There are two other types of beneficiary challenges that could trigger the No Contest clause in an estate plan. The first is a creditor’s claim. This is when the beneficiary challenges the estate, claiming that it owes them money. If the beneficiary wins their case, they will recoup their money but will otherwise be disinherited. Probable cause is not a defense with creditor’s claims.
The second situation is when a beneficiary challenges the transfer of property (as directed by a will or trust), claiming that the property did not belong to the estate to the begin with. Again, if the beneficiary wins this case, they could change how certain property is/isn’t transferred, but the beneficiary would be otherwise disinherited from the estate.
Have Additional Questions? Contact Brian M. Douglas & Associates’ Estate Planning Team
For someone who is considering including a No Contest clause in their estate documents, it’s helpful to understand that the clause can be an effective deterrent, but that the beneficiaries can still claim probable cause and good faith. For those beneficiaries who want to challenge a will or trust, it’s important to weigh your options and decide if it’s worth the risk of being disinherited.
If you have additional questions about a No Contest clause, or if you’re interested in setting up an estate planning consultation, please reach out to us at (770) 933-9009 or via our online contact page. Our estate planning team would be happy to help.
