Friday, 19 July 2024

Estate planning: More guidance on deterring will and trust disputes

This supplements my previous article on the same subject with a basic discussion of two “carrot and stick” methods that may help ensure that your testamentary wishes are respected after you die: the “no contest clause” and the “forced election” (aka “the widow’s election”).

Let’s discuss each individually.

The “no contest clause” used in a will and/or trust is the most trusted legal tool to make beneficiaries accept and not quarrel over the decedent’s estate plan.

Very simply speaking, a no contest clause deters a beneficiary from bringing lawsuits to contest the terms of a trust or a will, involving certain allegations. The deterrence is to disinherit a beneficiary entirely if he or she should bring such a contest and fail.

Under current law, as of Jan. 1, 2010, “no contest clauses” now only apply to the following three types of legal challenges: “direct contests” – those contests alleging forgery, improper execution, lack of capacity, menace, duress, fraud or undue influence, and alleged revocations of trusts and wills that are brought without probable cause; actions to determine the character, title or ownership of property – if expressly provided for as triggering a contest; and filing a creditor’s claim or an action to enforce a creditor’s claim – if expressly provided for as triggering a will/trust contest.

The “probable cause” exception for bringing a direct contest protects a beneficiary who brings the contest based on a “reasonable belief” at the time that further legal discovery will lead to evidence supporting a “direct contest.”

The scope of the no contest clause should be drafted with particular attention to who is likely to bring what type of contest.

The no contest clause only deters beneficiaries who stand to lose something significant by bringing a contest so that the beneficiary’s fear of losing what they are assured of receiving outweighs their desire (greed) to try to receive more.

Some people chose to buy peace for their primary heirs by leaving something significant, with a no contest clause attached, to a beneficiary whom they otherwise might entirely disinherit.

Next, the “forced election.” A forced election occurs when a decedent’s will or trust forces a beneficiary to choose between either accepting an inheritance (under the will or trust) or asserting his/her ownership rights in property that the decedent’s will or trust gives entirely to someone else.

The forced election typically involves a deceased spouse attempting to give one or more items of community property to someone other than the surviving spouse/co-owner by inducing (or coercing) the surviving spouse to accept an inheritance of money (or other property) that is left to the surviving spouse under the same legal instrument.

Nowadays, however, the “forced election” is seldom used due to its adverse tax consequences, its engendering acrimonious feelings in the surviving spouse, and the existence of better alternatives.

For example, consider a married man who writes a will gifting his and his wife’s community property residence to a testamentary trust (established at his death) that provides for the lifetime benefit of his surviving wife (if she survives) and that thereafter leaves all to the husband’s children from his prior marriage; in the same will the husband also leaves a generous gift of money to his surviving wife as an incentive to obtain her cooperation.

Thus, the surviving wife must either accept her husband’s testamentary gift of money and the right to remain in the couple’s home until she dies, or else assert her one-half ownership right in the couple’s community property residence. Whether the surviving spouse will agree usually depends on how generous is the incentive.

Neither of the foregoing “carrot and stick” approaches guarantees that the decedent’s wishes will be respected and that litigation will be avoided.

They are, amongst the available tools, along with those discussed in my prior article, available to help ensure that one’s testamentary wishes are carried out.

Dennis A. Fordham, attorney (LL.M. tax studies), is a State Bar Certified Specialist in Estate Planning, Probate and Trust Law. His office is at 55 First St., Lakeport, California. Dennis can be reached by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at 707-263-3235.

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