A will contest is, by its nature, an ugly ordeal: Someone is already disappointed and feels mistreated. This is often called a caveat proceeding and can now extend, in Maryland, to trusts and even paid on death or joint assets in some cases.
The best planning doesn’t preclude disappointed family members and hangers-on from trying to get what they consider their “fair share” of an estate.
There are some steps you can take to avoid this happening to your estate, says a recent article, “Counterattack: Tips for Thwarting a Will Contest,” from Kiplinger.
Traditionally, an in terrorem provision is added, known as a “no-contest” clause, to a will or a revocable trust to discourage attacks. If triggered, it can cause an heir to lose their entire inheritance if the person is excluded from a will or trust. Suppose the person challenges the appointment of the personal representative or trustee or claims to be a creditor when the probate court has denied this status.
However, the no-contest provision isn’t always permitted. They are unenforceable in Florida and Indiana and of limited effect in Maryland. In some courts, states may refuse to enforce them under certain circumstances. There are other ways to achieve the goal of excluding an heir or maintaining a firm grip on the estate.
Authorize a personal representative or trustee to pay the cost of a potential contest. In some states, personal representatives and trustees are authorized to litigate on behalf of an estate or trust or retain attorneys to do so. Even when a potential heir is omitted from a will or trust, knowing the estate’s assets will be used for litigation expenses and will shrink the size of the estate is enough to deter some litigious people.
Require mediation for any disputes. Some states allow mediation, arbitration, or alternative dispute resolutions to resolve issues. A will could require a potential challenger to use an alternative to litigation and provide guidelines for dispute mediation, from determining how mediators will be selected, whether the process should be adjudicatory or collaborative, and the scope, timing, and nature of mediation.
Establish a “litigation holdback fund.” Instead of forfeiting the entire interest in the estate by filing a lawsuit, the beneficiary’s interest in the estate could be escrowed, with access restricted during a will contest. When eventually paid to the beneficiary, the claim would be reduced by the cost of litigation, dampening the enthusiasm for a will contest.
Create a separate trust for a contentious beneficiary. The law provides the beneficiaries the right to request a complete copy of the trust agreement created for their benefit. By creating revocable trusts for each beneficiary, the beneficiary named in one trust will not see the contents of the trust for other beneficiaries. This could prevent a disgruntled person from comparing their trust to another, but there is a risk of a beneficiary alleging a fraudulent transfer in creating separate trusts.
What else can you do to prevent a will contest?
- Have the testator/settlor undergo an examination by two physicians to eliminate any charges of incapacity and provide the physician’s signed statements as scheduled to the will or trust.
- Include a statement of intent from the testator/settlor about the estate plan to demonstrate their intentions.
- Video the execution of the will or trust. Explain the dispositive scheme and inclusion of beneficiaries and obtain a signed statement from each witness and notary. Have a third party certify the video’s authenticity.
- Select witnesses for the will who have long close relations with all beneficiaries, making the challenge more complex and personally uncomfortable.
If you are concerned about protecting your estate plan, it’s best to meet with an experienced estate planning attorney. They can review your estate plan for potential vulnerabilities and orchestrate a more difficult for a family member to file a will contest.
Planning could save all concerned from the headache and expense of an estate battle.
Reference: Kiplinger (Nov. 10, 2022) “Counterattack: Tips for Thwarting a Will Contest”