It is difficult enough when a family is grieving from the loss of a loved one. When tensions are high, the situation can become contentious quickly, especially when there is money involved. This is where an in terrorem clause, or a no contest provision, can come into play.
A no contest provision in a Will or Trust states that if a beneficiary challenges the Will or Trust he forfeits his share of the decedent’s estate. New Hampshire courts will enforce a no contest provision. This typically applies to the beneficiary that is named in the Will or Trust to get something, so he must determine if his share is worth risking by contesting the Will or Trust. One of the reasons a person may want to challenge a Will is because he has been disinherited by a parent and thinks he should receive a share of his parent’s estate, which you can read about in a prior blog post titled Can I Disinherit My Child. If the child is completely disinherited, the no contest clause has no real negative impact on him. Some other reasons a person may want to challenge a Will or Trust are when he thinks the testator (the person who made the Will or Trust) lacked testamentary capacity, was under undue influence or duress, or there was an act of fraud at the time the testator signed.
The court holds the testator’s intention and wishes for the disposition of his or her assets in high regards and does not go against what the testator detailed in his or her Will or Trust without extensive investigation and deliberation. If a beneficiary challenges the Will or Trust and loses, he may no longer be entitled to his share of the assets and he may get nothing in the end. To make a no contest provision meaningful, the beneficiary must have something to risk if he contests and loses, other than incurring his own, and possibly the estate’s, attorneys’ fees and costs of litigation, if the Judge finds his challenge to be frivolous or brought in bad faith. For example, if the testator had three children and had a million dollar estate, leaving $5,000 in the Will with a no contest provision to one child and having the other two children split the remainder, the no contest provision may not be a substantial deterrent to the child who is only getting $5,000 since if he wins the Will contest, he could get one-third of the million dollars instead of just the $5,000. However, if the child were going to receive $50,000 through the Will with the same no contest provision, the risk of losing that amount of money is higher, which may be enough of a deterrent to stop him from challenging the Will. An attorney can help with strategies to reduce the chance of a disinherited child contesting your Will.
A properly drafted no contest provision can help with the smooth administration of your estate and distribution of your assets after you pass away, providing you peace of mind while you are alive. Also, when your child contests a Will or Trust, he and his siblings may insult each other or you, which may not be easy to forgive later in their lives. A no contest provision may deter saying something that once said, cannot be taken back.
Andrea Nelson is an attorney at Hamblett & Kerrigan who focuses her practice in the area of estate planning, including wills, trusts, health and financial powers of attorney. Attorney Nelson can be reached at [email protected].