In this day and age, people go to court over just about anything. They spill their coffee and sue a restaurant because it was hot. They eat too many fast food burgers and sue the company for making them. We are definitely in a litigation happy society. What does this have to do with the contest of a Trust?
The truth is, anyone can hire an attorney to question how legal affairs have been arranged. Therefore, in theory, anyone can attempt to contest a Trust. Let’s look, however, at the reality of the situation.
Trusts Do Not Go Through Probate
To be utilized, all Wills must be Probated. Probate is the court supervised legal process that includes determining the validity of your Will, gathering your assets, paying your debts, taxes, and the expenses of Will administration, and then distributing the remaining assets to those persons entitled to them.
It is the public legal process of Probate that often encourages the contesting of a Will. Public notice is sent to creditors telling them that they have a certain number of months to bring any claim against the estate for debts the deceased person owes them. This public notice attracts anyone else that may feel they have a claim to part of your estate. This means that any interested party can easily join the routine Probate court proceedings and contest the Will at that time. Facing the prospect of a long, drawn-out court battle, oftentimes the executor or the other heirs will settle with the disgruntled heir by giving in to the “blackmail.”
Trusts on the other hand do not go through Probate. This means that there is not a court proceeding and there is no public notice. If someone feels that they are owed money from your estate, they cannot simply join an “already in progress” proceeding. Instead, they must take the initiative to begin their own lawsuit, thus incurring their own court and attorney fees.
To successfully contest a Trust, the person contesting has to prove that there was:
- Undue influence. This is the influence of another that destroys your freedom. The exercise of undue influence is suggested by excessive insistence, superiority of will or mind, the relationship of the parties, or pressure on you that you could not refuse.
- Lacking mental capacity. This means, in part, that you lacked the capacity to make a decision and to understand and appreciate all that the decision entailed. Neither one of these is easy to prove and thus prevents most superfluous lawsuits from ever occurring.
Creating a No Contest Clause
You can assume that no one is going to start litigation against your Will or Trust and you will most likely be correct. However, you can be even more assured by including an “In Terrorem” or “No Contest” clause.
A No Contest clause is useful if you think one or more of your heirs will dispute your wishes. This can happen if:
- You remarry and leave much of the estate to your new spouse instead of your children from a previous marriage.
- You plan to leave assets to your children in an unequal manner.
This clause does not mean that someone cannot contest the Will or Trust. It does mean, however, that if someone challenges the document, they will receive nothing from you under that document. Let’s look at two different examples.
- Example 1: You leave nothing in the Will or Trust to your son Bob. Bob is angry and decides to contest the Will or Trust. He has nothing to lose because the No Contest clause states that he can receive nothing if he contests. Since he is already receiving nothing, he may as well give it a shot.
- Example 2: You leave $100,000 to your son Bob, but it is considerably less than the $750,000 you leave to his sister Jane. Bob is angry, but he thinks twice before contesting the Will or Trust. Why? If he contests the Will or Trust, he stands to lose the $100,000. A bequest that is significant under the circumstances might make the challenger think twice before challenging your wishes.
No matter how you create a Will or Trust, there is no guarantee that someone won’t try to contest it. Remember, anyone can litigate anything at anytime. However, creating a comprehensive well drafted Will or a Revocable Living Trust using a qualified estate planning attorney will allow you to create a situation that is difficult to contest and can stand up in a court of law.