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When to Challenge a No Contest Clause: Insights for Heirs and Beneficiaries

No contes clause

A no contest clause prohibits anyone from challenging the validity of a will, trust, or other estate planning documents. If you use it correctly, it can help ensure that your final wishes are respected after you pass away. In most situations, however, we believe it can cause more harm than good.

What is a No Contest Clause?

A no-contest clause (NCC) is also known as in terrorem clause. It prohibits an individual from challenging the validity of a will, trust, or other estate planning documents. This type of clause is included in an estate plan as a way to deter any potential disputes over the validity of the document. By including this clause in your estate plan, you can ensure that your final wishes are respected after you pass away by preventing any possible legal disputes.

When Should You Use a No Contest Clause in Your Will?

Using a no contest clause in your will can be beneficial if you expect potential disputes over the validity of your will. For example, if you think that someone may challenge the terms of your legacy or executorship authority, including a no contest clause can help deter those challenges. Additionally, using a no contest clause can also serve to protect your estate from frivolous lawsuits and reduce the likelihood of costly litigation. Therefore, it is important to understand when it is best to include this type of clause in your will.

When a No Contest Clause Doesn’t Work

There are two types of situations in which a NCC doesn’t work. The first is if the person challenging the document is receiving little to no inheritance. Then they figure they might as well roll the dice and challenge the document. The other situation in which they don’t work is if the challenger has probable cause to bring a challenge. We’ll go more into those two situations below.

It doesn’t work if the challenger is already disinherited.

The first is if the beneficiary is given no inheritance or a minimal inheritance. In that case, the beneficiary figures they might as well contest the will or trust since they have little to lose.

In other words, a “no contest” clause does not prevent a person from challenging the will.  If a contest is brought, and it is successful, then the will, including its “no contest” clause, will crumble into the dust. In that case, the challenger will take under the law of intestate succession or a prior will or trust, as the case may be.

If the “no contest” clause is to be effective in deterring someone from filing a contest, it must leave the person enough property so that he will have to ask himself the question: do I take what I have been given and go quietly, or do I risk losing it by filing a contest that might be unsuccessful and for which the court might determine there was no probable cause?  If the person has been disinherited, or has been left only a nominal amount, the person has nothing to lose by challenging the will.

How much is enough?  That depends.  In a California case, the grantor of a trust had $40 million and 3 children.  She gave one child $30 million and the other two $5 million each.  The trust contained a “no contest” clause.  I do not know about you, but if someone left me $5 million, I would take the money and run.  The two children, however, contested the trust.  They lost. The court held that they did not have probable cause.  They forfeited the amount left to them in the trust.  See In re Irene Lieberman Revocable Trust (No. PTR-15-299196, San Francisco Superior Court, November 9, 2016).  But the “no contest” clause did not prevent the bringing of the contest.  It merely penalized a person who, without probable cause, brought a contest and lost.

It also doesn’t work if the challenger is successful.

Under Arizona Revised Statutes §14-2517, a no contest clause is not enforceable if the person challenging the will or trust had probable cause to do so. This means that if a beneficiary has a legitimate and reasonable basis for believing that the will or trust is flawed—for example, due to concerns about the testator’s capacity, the presence of undue influence, or issues with how the document was executed—they can contest the document without automatically losing their inheritance under a no contest clause. This exception aims to balance the deterrent effect of no contest clauses against the need to address genuinely problematic wills and trusts, ensuring that beneficiaries can raise legitimate concerns without fear of punitive repercussions.

This nuanced approach to no contest clauses in Arizona underscores the importance of carefully considering the decision to contest a will or trust. Beneficiaries thinking about challenging these documents should not be deterred solely by the presence of a no contest clause. Instead, they should evaluate the strength of their probable cause for contesting.

If there is a solid foundation for the challenge, the law provides protection against the clause’s punitive measures. This ensures that the integrity of the estate planning process is maintained, allowing for the correction of documents that may not truly reflect the decedent’s wishes due to undue influence, lack of capacity, or procedural errors. Beneficiaries considering such a step should consult with a legal professional who can help assess the merits of their case and navigate the complexities of estate law in Arizona.

How Does a No Contest Clause Work?

A no contest clause works by prohibiting legal challenges to the terms outlined in an estate, trust, will, or other financial documents. It can be used to protect the interests of a testator and their designated beneficiaries without requiring long court battles. The clause typically prevents anyone from contesting any documents related to the arrangement, including the transfer of assets or ownership. In addition, some clauses may impose further penalties or restrictions for breach of contract if someone does challenge the terms described.

Who Uses No Contest Clauses?

No contest clauses are often used by individuals or entities who wish to reduce the chance of someone challenging an estate plan, trust, or will. The clause is especially beneficial if the individual creating these legal documents has reason to believe that a beneficiary or family member may challenge the terms of these documents down the line.

When to Challenge a No Contest Clause.

Deciding when to challenge a no contest clause in a will or trust is a significant legal decision that requires careful consideration and understanding of the specific circumstances surrounding the estate.

If there is probable cause.

One of the primary instances where challenging a no contest clause becomes a viable option is when there is probable cause to believe the will or trust does not accurately reflect the true intentions of the decedent. This might be due to concerns about the testator’s mental capacity at the time the document was executed, potential undue influence exerted by another party, or procedural errors in how the document was prepared or signed. Probable cause provides a legal shield against the automatic forfeitures often stipulated by no contest clauses, allowing beneficiaries to seek justice without the risk of losing their inheritance for merely raising legitimate concerns.

Make sure you have enough evidence.

Before initiating a challenge, it’s crucial to gather as much evidence as possible to support the claim of probable cause. This might include medical records, witness statements, or documentation of the decedent’s estate planning process. Consulting with an experienced estate attorney can provide invaluable guidance on the strength of your case and the strategic considerations involved in proceeding with a challenge. They can help navigate the complexities of estate law, ensuring that your challenge is not only justified but also presented in a manner that maximizes the likelihood of a favorable outcome. Remember, challenging a no contest clause is about upholding the decedent’s true wishes and ensuring the equitable distribution of their estate in accordance with those wishes.

Challenging a Will or Trust? Know Your Rights and Options.

If you’re currently facing a situation where you believe a will or trust does not accurately reflect the wishes of a loved one due to undue influence, lack of capacity, or other concerning factors, it’s crucial to know your rights and options. The presence of a no contest clause can be intimidating, but Arizona law provides protection for those with probable cause to challenge.

Don’t let the fear of punitive measures prevent you from seeking justice and ensuring the true intentions of the decedent are honored. Reach out to our experienced estate planning attorneys for a confidential consultation. Together, we can assess the strength of your case, explore your legal avenues, and determine the best course of action to protect your interests and those of your loved ones. Call us today at 602-443-4888 to ensure that your voice is heard and your concerns are addressed with the respect and attention they deserve.

 

ABOUT THE AUTHOR

Founding attorney Paul Deloughery has been an attorney since 1998, became a Certified Family Wealth Advisor. He is also the founder of Sudden Wealth Protection Law.

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