With the increase in the number of challenges to wills and trusts, it should come as no surprise that many estate planning documents contain language to protect against frivolous challenges. These so-called “no contest” clauses essentially provide that should a disgruntled beneficiary file a claim to set aside the subject will or trust, such an action would trigger the “no contest clause” and that individual would be “written out” of the plan. In other words, these clauses are like the testator saying: “If you don’t like the small percentage I gave you, you better not challenge, because if you do, you will take nothing.” These no contest provisions can serve as a real deterrent to challenges. Of course, if a beneficiary challenges a will and prevails (convincing the court that the testator lacked capacity or was unduly influenced), the no contest provision would really have no effect, since the court would be setting aside the entire document. So, successfully bringing a challenge to a will or trust will not cause the challenger to be “written out” of the estate plan. The penalty will be put in place only if the challenger loses.
However, there are circumstances where a beneficiary might not seek to set aside the estate plan but may instead have concerns about the manner in which the trustee of the trust or executor of the estate is handling matters – whether that person is administering the funds properly, properly making investments, etc. With this type of a claim, one might not seek to actually challenge the will or trust itself, but rather might be challenging its administration only. Even in such challenges, depending on the breadth of the no contest provision, such a claim could be interpreted by the court to trigger the no contest clause. The New Hampshire Legislature recently passed legislation which allows an individual in this scenario to obtain an upfront ruling as to whether the proposed claims, if brought forward, would in fact trigger a no contest provision. This “safe harbor” action should be strongly considered any time a petition is filed that might trigger a no contest clause. In many of these cases, the stakes are high.
It is imperative, then, to take extra precautions to ensure the no contest provision is not accidentally triggered. With these safe harbor claims, the court will review a proposed petition and, to the extent possible, issue a ruling declaring at the outset whether the claims asserted constitute a violation of the no contest clause.
