Including A “No-Contest” Clause In Your Will May Prevent A Battle Over Your Estate
You can generally use your Will to distribute assets as you see fit, but the possibility of a Will contest looms whenever you make an uneven or unexpected distribution. For example, you may wish to favor one child over another or provide a large bequest to a charity using assets that your spouse or children would otherwise receive. If a spouse or child disagrees with your decision, he or she may try to challenge the validity of your Will on a number of grounds, such as by claiming that you made it when you lacked mental capacity or that someone improperly influenced you into creating it. If successful, a court will invalidate your Will, and your assets will not pass in accordance with your wishes.
Although you cannot avoid the possibility of a Will contest entirely, a no-contest clause may assist in making protracted litigation over your Will less likely. A no-contest clause is a provision in a Will that penalizes those who challenge its validity.1 It is generally designed to prevent the challenger from receiving any bequest under the Will if a challenge is asserted. Although the specific wording of a no-contest clause may take many forms, the following is a basic example:
The gifts in this, my Will, are made on the express condition that none of the beneficiaries shall oppose or contest the validity of this Will in any manner. Any beneficiary who contests the validity of this Will or in any way assists in such an act shall automatically forfeit whatever gift he or she would have been entitled to receive under the terms of this Will.
Historically, no-contest clauses were called in terrorem clauses because they were intended to strike terror in the hearts of anyone who might challenge the will.2 Over the years, however, these clauses began to fall into disfavor because of public policy concerns regarding the deterrent effect they may have on individuals with an otherwise meritorious basis for challenging the validity of a Will.3 Although some states now flatly refuse to enforce no-contest clauses, they are enforceable in New Jersey and New York under certain circumstances.4 New Jersey courts will enforce such clauses when a beneficiary lacks probable cause to challenge a will, while New York courts will do so unless one of a limited number of statutory exemptions apply.5 Accordingly, a no-contest clause could help prevent a beneficiary who knows your Will is valid from asserting a challenge based solely on the prospect that your estate will settle to avoid protracted litigation.
A no-contest clause has no teeth unless the beneficiary who intends to bring a contest has something to lose. You should thus provide bequests in your Will to all potential challengers in an amount sufficient to make them consider carefully whether they wish to risk losing those bequests by commencing a baseless Will contest. The clause should also be drafted so that your intent is explicitly stated.6 If at all possible, the clause should identify the beneficiaries you believe might assert a groundless challenge to the Will and unambiguously indicate all assets that they will lose if the contest is unsuccessful.7
1 See, e.g., N.J.S.A. 3B:3-47.
2 Donna R. Bashaw, Are In Terrorem Clauses No Longer Terrifying? If So, Can You Avoid Post-Death Litigation With Pre-Death Procedures?, 2 NAELA J. 349, 350-51 (2006).
4 See, e.g., In re Estate of Lane, 562 So.2d 352, 353 (Fla. Dist. Ct. App. 1990) (finding in terrorem clauses to be unenforceable under Florida law); Haynes v. First Nat. State Bank of N.J., 87 N.J. 163, 187-189 (1981) (recognizing that an in terrorem clause may be enforced where there is no probable cause to challenge a Will); In re Estate of Singer, 13 N.Y.3d 447, 451 (App. Div. 2009)(“holding in terrorem clauses enforceable except as provided by statute, although noting they are “not favored and [must be] strictly construed.”)
5 See id.
6 Bashaw, supra, at 356.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.