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New Case Law About No Contest Clauses
“How can I keep someone from contesting my will?” Clients ask us this question fairly frequently. While there is no surefire way to avoid litigation, a “no contest clause” can provide a powerful incentive for a beneficiary not to litigate, even if the beneficiary is displeased by the provisions of the client’s trust or will.
Historically, “no contest clauses” state that if any beneficiary brings a lawsuit, and if the court finds that the case was brought frivolously or not in good faith, then that beneficiary loses the right to inherit under the trust or the will. Instead, that beneficiary’s share of the inheritance shall be distributed to the successor beneficiaries.
Of course, a “no contest clause” is only an incentive for beneficiaries not to litigate and does not provide any incentive for non-beneficiaries to behave themselves. If a troublesome family member is disinherited from the will altogether, a “no contest clause” does nothing to dissuade him from litigating, since he has nothing to lose by bringing suit. After all, he definitely receives nothing if he allows the will or the trust to be administered as it is written, but he potentially could receive something if he litigates.
To combat this problem, clients sometimes propose leaving a small amount (such as $1.00) to a child who they would otherwise want to disinherit, since this makes that child a beneficiary of the estate plan and the “no contest clause” would thus apply to the troublesome child. However, this is not an effective strategy either, since the amount the child would risk losing ($1.00) is so small compared to the amount she could receive by winning a lawsuit. Thus, for a “no contest clause” to work effectively, the client needs to leave enough money to the beneficiary that the beneficiary is not willing to risk losing that inheritance.
Courts have traditionally taken the testator’s rationale for including a “no contest clause” in the estate plan into account in determining whether a beneficiary’s lawsuit violates the intent of that particular “no contest clause.” In 2020, the Virginia Supreme Court ruled that the grantor of a trust had only intended the “no contest clause” to apply to beneficiaries contesting certain aspects of the trust, and allowed a beneficiary to inherit because the issue being contested was outside of the scope of the grantor’s intent for the no contest clause.
Furthermore, Virginia courts have historically allowed beneficiaries to ask a court for guidance in interpreting the provisions of a will without violating a “no contest clause.” Thus, a beneficiary may ask a judge for clarification on a portion of the estate plan that is unclear and can nonetheless inherit under the estate plan despite bringing suit, even when the document in question has contained a “no contest clause.”
Under a 2023 Virginia Court of Appeals decision, however, “no contest clauses” have become much more powerful than in the past. In this case, the court held that a beneficiary can be disinherited even if he brings the suit in good faith (such as, for example, asking the court to interpret a particular provision of a will or a trust). In other words, if a “no contest clause” is in the estate planning document and a beneficiary brings a suit, then that clause should be enforced against the beneficiary, regardless of the circumstances that led to the suit being filed.
As a result, “no contest clauses” are an incredibly powerful tool to ensure that your estate plan is enforced exactly the way it is written. This also means that you must have complete trust in your fiduciary and his ability to execute his duties properly, because a beneficiary who questions a fiduciary’s actions, even in good faith, would trigger the “no contest” provision.
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