What You Need to Know About Elder Law and Estate Planning for the Runner and…
Unfortunately, heirs may not always be content with the assets or amount of money left to them in a Will or Trust. Once the Testator or Grantor passes away, there is not much they can do to prevent their heirs from challenging their wishes. However, if you are worried that an heir may contest your Will or Trust after you pass away, an option afforded to you is to include an “In Terrorem Clause” in your Will or Trust.
An In Terrorem Clause, also known as a “No-Contest Clause”, provides that if an heir objects to the Will or Trust in court and loses, then that heir will not receive the inheritance devised to them under the estate planning document they challenged. Ordinarily, the In Terrorem Clause will indicate that the losing objectant will be treated as predeceased and without issue, thus splitting their inheritance between the remaining beneficiaries.
Accordingly, if you are worried that one of your beneficiaries may be upset with what was distributed to them or the amount distributed to them, it may be a good idea to have your attorney include an In Terrorem Clause in the estate planning document to deter your beneficiaries from challenging your wishes. That said, an In Terrorem Clause only works if you are leaving assets of value to the potentially disgruntled beneficiary. If the disgruntled beneficiary is not receiving enough in value, it may not deter them from challenging the Will or Trust as the reward of receiving a greater inheritance may vastly outweigh the risk of losing the inheritance.
For example, where a Decedent passes away with an Estate valued at $2,000,000.00 and the Decedent is survived by three children, and one of the Decedent’s children is left $1,000.00 under a Will while the other two children are to split the remaining $1,999,000.00, the disgruntled child may not be deterred from challenging the Will. In such an example, the chance of invalidating the Decedent’s Will and receiving one-third of $2,000,000.00, instead of $1,000.00, may be worth the risk of losing the $1,000.00 bequeathed to them under the Will. Similarly, if you entirely disinherit an heir, an In Terrorem Clause will pose no threat to their objection as they do not stand to inherit anything anyway.
Most states, including New York, allow In Terrorem Clauses in estate planning documents. However, if the contest by the heir is based on probable cause or good faith, then the In Terrorem Clause may be found unenforceable. Therefore, if the court determines that the heir has a valid argument in their contest, the court may not prevent the heir from still receiving their inheritance despite ultimately losing their objection.
Furthermore, an In Terrorem Clause may be applied to certain portions of your estate planning document, but not others. For example, the disgruntled heir may still be able to challenge the qualifications of the nominated Executor under the Will to serve as Executor without garnering the punishment instilled by the In Terrorem Clause. It should be noted that In Terrorem Clauses are specifically unenforceable in only two states, namely Florida and Indiana. Thus, if a beneficiary challenges a Will with an In Terrorem Clause in either Florida or Indiana, their inheritance will not be invalidated if their objection fails.
It should be noted that an In Terrorem Clause may also prevent beneficiaries from fixing any mistakes made in the estate planning documents. For instance, if the Testator of a Will accidentally does not include a specific bequest to a certain beneficiary, the beneficiary could be completed disinherited by the In Terrorem Clause if they attempt to object to the Will and fix the mistake.
An In Terrorem Clause can be a useful tool to avoid family in-fighting after you are gone, but it may not work for every estate plan. Accordingly, you should contact an estate planning attorney who can guide you as to how your state treats In Terrorem Clauses and how to best deal with particular heirs you worry may not agree with your estate planning wishes.