Take or Leave It: A New Indiana Law Permits the Enforcement of No Contest Clauses in Wills
Have you ever read about a celebrity who passed away and included a threat in his will that anyone who contested it would be disinherited? If so, did you wonder, “Can I include something like that in my will, too?”
Well, as of July 1, 2018, the answer in Indiana is, yes. A new law recently took effect that allows Indiana residents to include such a clause in a will or trust. This brings Indiana into line with the 48 other states that also permit enforcement of is known as an in terrorem clause, or more commonly, a “no contest” clause.
This article addresses some of the basics of what no contest clauses are and whether you may want to consider including one in your own will or trust.
What is a no contest clause?
Simply put, a no contest clause is language that is included in a will or trust that states that a person who contests a will or trust risks losing whatever property was left to him or her.
A no contest clause is not required to be included in a will or trust; it is simply a new option that may be used in Indiana wills and trusts.
What is the benefit of the new law allowing no contest clauses?
The most common reason cited for allowing a no contest clause to be enforced is to reduce the chances that a disgruntled heir or beneficiary will file expensive and time-consuming litigation. In other words, if someone risks losing her entire right to any property from the will or trust, she is less likely to file a lawsuit contesting that will or trust overall.
Whether the new law in Indiana will have this effect remains to be seen. In addition, because the law is new to Indiana, questions remain about the position that courts will take when presented with a dispute involving a will with a no contest clause.
Should you consider including a no contest clause in your will or trust?
The question that people must now consider is whether or not including a no contest clause is appropriate for their particular circumstances. Your attorney can help you make this determination and advise you about potential risks of including or not including a no contest clause in your will or trust.
Prior to meeting with your attorney, it may be helpful for you to think about some of the following questions:
- Is there a relative whom you have considered “disinheriting” entirely?
- Do you have a group of persons who would normally inherit from you equally, but to whom you wish to leave unequal amounts in your will?
- Is there a relative or other person whom you suspect will likely become contentious or cause problems with your estate?
Your answers to the above questions and your particular family circumstances will play a large part in helping to determine whether including a no contest clause in your will is good option for you.
Does including a no contest clause guarantee that nobody can contest my will or trust?
No. It is important to remember that a no contest clause does not prohibit someone from contesting your will—it only says that if someone does contest it, then that person risks losing her right to any or all of the property that was given to her in the will.
In addition, the new Indiana law permitting no contest clauses includes several specific exceptions that allow a person to file a suit in an estate without risking giving up her right to property from a will containing a no contest clause.
This article does not examine all of the exceptions, but some of the main ones are:
- “Good cause”: The broadest of these stated exceptions is when the court finds “good cause” for a person to have brought the suit. How Indiana courts will interpret “good cause” remains to be seen for certain, but it likely includes cases where the court finds that the suit was brought because there was evidence of fraud, duress, or undue influence that affected the contents of the will.
- Clarification/interpretation of the will: Another exception is when a person files a suit to seek clarification of the will. For example, let’s suppose the decedent’s will includes a no contest clause and leaves a certain part of her real estate to her daughter, Susan, and a certain part of it to her son, John. However, the decedent owned multiple pieces of property at the time of her death, and the will did not adequately specify which parts Susan was to receive and which parts John should receive. Susan could still file a suit, even with the no contest clause, in order to ask that the court make a determination about who should get what without risking her right to receive real estate under the will.
- “What-if?”: In addition, the law allows a person to file a suit to ask the court a “what if” question, without putting her right to property from the will at risk. For example, if a person thinking about contesting a will is not sure whether her particular reason would trigger the no contest clause to remove her property right if she filed a suit, she can file a suit to essentially ask the court, “What if I contested the will based on X? Would that be putting my right to property at risk?” Asking the court to answer the “what if” question alone will not put the person’s right to property at risk.
- Settlement agreements: Parties can still enter into a settlement agreement between themselves to resolve a dispute regarding a will without risking their rights to inherit property from the will.
If you would like to read the full list for yourself, you can find it by searching online for Indiana Code § 29-1-6-2. (Be sure you look for the version that is current after July 1, 2018).
The benefits and drawbacks of including a no contest provision in Indiana wills and trusts will only become clear over time. In the meantime, you should be sure to consider your own circumstances and desires, and share those with your estate planning attorney when discussing your will or trust.