Are No-contest Clauses a Good Idea?
One of the primary objectives of any estate plan is to give clear direction to surviving family members on how the deceased wanted his or her property handled and distributed. An underlying purpose of planning ahead is to eliminate the need or motivation for disputes among survivors and to ensure the wishes of the deceased are followed. While a comprehensive estate plan can certainly reduce the likelihood of a contest or challenge to the terms of the estate plan or the validity of the executed documents, conflict still occurs — often when a potential heir or beneficiary believes the distribution is unfair or biased. The litigation that grows out from such disagreements fractures families and significantly depletes the assets of the estate, as the executor spends the estate’s money to fight the contest. While some legal challenges to an estate plan are legitimate, others are not. In either case, an individual who establishes an estate plan has a vested interest in preventing such legal battles. One tool that some choose to incorporate into an estate plan to deter challenges is a no-contest clause (also known as an “in terrorem” or “forfeiture” clause). A no-contest clause may not be appropriate in every case, but understanding how such provisions operate will facilitate the creation of more comprehensive estate plans.
Georgia Law on No-contest Clauses
As of this writing, Florida is the only state that absolutely prohibits the use of no-contest clauses in estate planning documents; but Georgia’s law on the valid use of such a clause is important to understand. Failing to follow it may invalidate the clause and negate the drafter’s intent. Specifically, Georgia courts will only enforce a no-contest clause if the language in the estate document directs how property should be distributed in the event the clause is violated. In other words, it is not enough to simply disinherit someone if he or she challenges a will. The drafter must also include what happens to the property the person would have inherited if not for the challenge. In practical terms, this means the drafter must provide clarity on the disposition of the property based on a variety of contingencies; i.e., contest, death, birth, divorce. Then other provisions in the law or the document itself do not work to nullify the effect of a no-contest clause. Options include entirely disinheriting the person who challenges the document or reducing his or her share in proportion to the amount spent on litigation. This analysis requires working with an experienced estate planning attorney who knows how to properly draft will or trust language to effectively convey the drafter’s intent.
Some Considerations Before Including No-contest Provisions
In order for no-contest clauses to accomplish the desired end – the avoidance of legal contests, strategy must be employed as to whom is subject to these clauses and when they will operate. For example, if a beneficiary or heir is completely disinherited, he or she has no incentive to avoid a contest and there is nothing to lose. However, if the individual is left something under the estate plan, it is more likely he or she will accept the gift without complaint. In addition, providing specific language about the creator’s purpose or intent behind the no-contest clause, as well as which acts are specifically prohibited (pursuing a legal action or attempting to collect a debt against the estate, as examples), will help to bolster enforceability if the validity of the clause is challenged.
Get Legal Advice
Creating an intentional and effective estate plan takes time and effort, but reassurance that your family will receive the financial security they need and deserve is worth the sacrifice. The attorneys at MendenFreiman know how to put together an estate plan that will meet your goals and the needs of your family. Contact the Atlanta law firm today to schedule a consultation.