When you are making inheritance planning decisions, you may come to the realization that someone in the family may not be happy with your choices. Under these circumstances, the individual in question may decide that they want to contest the terms of the will or trust.
There is a legal step you can take to dissuade a disgruntled person from taking this action.
No-Contest Clause
You can include a no-contest clause in a trust or a will, and you may see the terms “forfeiture” or “in terrorem” clause utilized. The clause will call for the disinheritance of anyone that is named in the will or trust if they take a certain action that is contrary to your wishes.
In the vast majority of cases, these clauses are used to address potential estate contests. A person that is not happy with their inheritance could still contest the estate, but they would be taking a big risk.
2019 Connecticut Superior Court Case
Are no-contest clauses enforceable in court 100 percent of the time? The answer to this question will depend on applicable state laws.
For example, in Indiana and Florida, a beneficiary can challenge an estate if there is a no-contest clause and still get their inheritance if they lose.
The 2019 Salce v. Cardello Connecticut Superior Court case reaffirmed a standing belief among Connecticut estate planning attorneys that these clauses are not a surefire solution.
In this case, one sibling identified errors in the tax returns that were prepared by the executor of the estate. She wanted the court to allow her to present her argument, but there was an in terrorem clause.
Ultimately, the court stated that “Connecticut recognizes the validity of forfeiture clauses,” but they allowed for exceptions when there is probable cause to support a good faith objection.
Complete Disinheritance
If you want to disinherit someone entirely when you know they will not take it lying down, you may want to take pause. Yes, you can include a no-contest clause, but it would have no effect whatsoever.
If you take a step back and think about it, the person in question would have nothing to lose if they contest the estate. Under these circumstances, you should consider leaving a modest bequest that would be enough to make the disgruntled inheritor think twice.
Spendthrift Trusts
Sometimes a parent will leave one of their children a lesser inheritance because they think the inheritance will be squandered. They leave more to others because they want their legacy to be put to good use, and this is understandable on one level.
As a response, the spendthrift heir may resolve to challenge the terms, and they would have a reasonable premise on the surface. Under these circumstances, there is another option that can be preferable in some instances.
A spendthrift trust can be created, and a trustee would manage the resources on behalf of the beneficiary. The assets would be protected from the beneficiary’s creditors, and the trustee could be instructed to distribute limited assets over an extended period of time.
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Since you are here looking for estate planning information, you should definitely access our worksheet. This resource has been carefully prepared to provide a better understanding of this important process, and it is being offered free of charge.
To get your copy, head over to our worksheet access page and follow the simple instructions.
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Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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