No Contest Provisions
There are times when a beneficiary of an estate or trust may want to challenge the terms of the will or trust. In order to avoid a challenge, the will or trust may include a “no contest” provision. A no contest provision is a clause that may be included in an estate planning instrument, such as a will or trust, to attempt to reduce or entirely eliminate a beneficiary’s interest if he or she pursues an action to challenge the document or any of its terms.
In Indiana, no contest provisions were void prior to July 1, 2018, and such a provision would not be enforced if included in an estate planning document. In other words, even if a will or trust included a no contest provision, a beneficiary was free to challenge the document or its terms with no risk of losing his or her inheritance.
Based on a change in the law that became effective on July 1, 2018, however, no contest provisions became enforceable, and a challenge to a will or trust that includes such a provision now may significantly risk a beneficiary’s interest. Under the current law, if a beneficiary legally challenges the document and loses that challenge, then the court is required to enforce the terms of the no contest provision, which could result in the beneficiary’s loss of his or her interest in the estate or trust.
Despite the enforceability of no contest provisions in Indiana, there are still ways in which a beneficiary may proceed to put a will or trust in front of the court without risking his or her inheritance. The no contest provision statute provides exceptions and circumstances under which a no contest provision will not be enforced. Such exceptions include:
- Actions brought by a beneficiary when there is “good cause” found by the court. This exception is a broad “catch all,” but likely includes actions to challenge the document based on fraud, undue influence, or duress;
- Actions seeking the court’s guidance on construction or interpretation of the document;
- Actions seeking the court’s ruling on proposed distributions or fiduciary fees;
- Actions seeking the court’s determination as to whether a proceeding would be considered a contest; and
- Settlement agreements to resolve disputes between parties regarding a will or trust.
Given this fairly broad list of exceptions, a no contest provision will not provide iron-clad assurance that a will or trust cannot be challenged. In fact, given the very general term “good cause”, the provision itself could lead to litigation over whether a contest is truly a contest. As these provisions only recently became enforceable, a body of case law has not yet developed regarding the interpretation or enforcement of no contest provisions. Until the Indiana courts provide guidance on this issue, it is not clear how effective a no contest provision truly is. That being said, a no contest provision provides an avenue to at least attempt to limit challenges.
There are advantages and disadvantages to including a no contest provision that are based upon your individual and familial circumstances. Prior to deciding to include a no contest provision in your estate planning documents, careful consideration should be given and counsel should be sought.
If you are interested in an estate plan or would like to discuss whether a no contest provision would be appropriate for your estate plan, contact a member of Barrett McNagny's estate planning team to speak with one of our attorneys who are experienced in assisting clients with estate planning documents.
About the Author:
Carta H. Robison focuses her practice in the area of estate planning and administration where she assists clients with estate planning, estate administration and gift planning. She can be reached at firstname.lastname@example.org or (260) 423-8910.