I recently helped a family settle a case involving a dispute over who should get the home of their deceased parents. The trust was clear – the home was to be part of the whole estate, and the whole estate was to be divided equally between the children. What was also clear was that the trust had a “no contest” clause. That clause required any contesting person to be disinherited. But the contesting child felt vehemently that he was entitled to the home. The child had health problems and believed the parents wanted the home to be given to him despite the unmistakable provisions of the trust. He felt strongly enough about it that he didn’t care that there was a “no contest” clause, and he filed a lawsuit.
The contesting son was legally wrong and was not entitled to special treatment, but there was simply no reasoning with him. So we defended the trust against the lawsuit to settle the matter. As the court proceedings progressed the family settled out of court, which is usually a better alternative than going to trial. But the question that my client asked time and again is a great one: “what good does a “no contest” clause do if an heir can still file a lawsuit?”
The problem is that a “no contest” clause is not enforceable against someone until a judge says it is. And a judge cannot say it is enforceable until a lawsuit is filed and the situation is presented for a decision. The judge then has to consider whether the language of the “no contest” clause meets the legal standard. The judge also has to decide whether the actions of the contesting heir has triggered the penalty of being disinherited. In Utah, if a contesting heir has a good faith basis for the contest, then that contesting heir will not be disinherited even though there is a “no contest” clause. For example, if a contesting heir can prove that the parents signed the documents while they were incompetent, under duress, mistaken, or under undue influence, then the courts will not punish the contesting heir for disputing the documents.
But that contesting heir better meet that good faith standard, or they will be disinherited. What a “no contest” provides is leverage, lots of leverage, against the contesting heir. The contesting heir knows he or she is taking an enormous risk in causing a lawsuit because they know (or should know) that if they lose, then the “no contest” clause will be enforced against them and they will lose all of their inheritance, plus their own attorney’s fees and costs. Whether they have to pay the attorney fees for the noncontesting heirs is a topic for another article. Because the contesting heirs have so much at risk, it gives the noncontesting heirs the upper hand to reason, negotiate, and persuade the contesting heir to settle down and comply with the provisions of the trust or Will.
What this means for you is to ensure your documents have a “no contest” clause the is written to meet Utah’s legal standard, that is broad enough to cover any level of contest, and that allows the trust or estate to pay for the legal fees necessary to defend the trust or estate against a contest. Then everything that is legally possible has been done in the event of a lawsuit.
M. Sean Sullivan, Esq., is an attorney at the law firm of Brindley Sullivan, PLLC. You can find more information about him and estate planning at brindleysullivan.com.