Avoiding challenges to a client’s testamentary documents should be an objective of every estate plan.
In recent years, many states have enacted pre-mortem validation statutes enabling testators or settlors to take proactive steps to avoid will or trust contests. Pre-mortem validation statutes provide a mechanism to be used during the testator’s life to ensure testamentary documents are declared valid and to avoid post-death challenges. Another approach that offers a strong deterrent to will contests is the use of so-called “no-contest” provisions that have been validated by statute or case law.
Pre-mortem validation statutes come in two varieties: judicial validation or a non-judicial procedure. Depending on the state, some judicial validation statutes apply only to wills, while others apply to both wills and trusts. Will statutes are useful for individuals who are domiciled in those states, but trust statutes can be used by settlors located anywhere who use that situs for their trusts. South Dakota and Delaware are the only states that have non-judicial pre-mortem validation statutes.
What’s Behind the Change?
Few controversies can emotionally and financially destroy a family like a good old-fashioned will contest. Almost any deviation from a plain vanilla disposition, like cutting out a spouse or children, bequests to charities or caregivers, multiple marriages, stepchildren/siblings or children out of wedlock could invite challenges that wreak havoc on the testamentary plan. Regardless of whether undue influence, incapacity or elder abuse exists, those arguments are often made after the testator is gone, witnesses have died, facts have become muddled and the truth has evaporated into the mist of time.
Traditional will and trust challenges are fraught with the potential for error and inefficiency. The standard for testamentary capacity only requires the decedent to have known the nature and extent of her assets, the natural objects of her bounty and the disposition she’s making of her property at the time the documents were signed.1 The will could have been signed at a moment of transient lucidity or when the requisite capacity was lacking. Validity contests involve forensic reconstruction of facts that can be akin to reading tea leaves. As time goes by, memories fade and become distorted, and the best witness to attest to the decedent’s intent, the decedent herself, is dead. Often, these cases involve dueling medical opinions reaching opposite conclusions and judges imposing their own beliefs and opinions about the veracity of witnesses and the decedent’s state of mind. The motivations of family caregivers who stayed close at hand and may even have had the audacity to drive the testator to the lawyer’s office to make changes that benefit the caregiver or reduce the interests of family members who withheld love and support in the waning years of life, are often a subject of speculation. Because of these limitations, improper contests are filed to force a settlement that departs from the decedent’s intent.
Many planners erect safeguards beyond basic witnesses and self-proving affidavits in the hope of preventing a contest. Most estate planners follow the same rote procedures at every will signing so that they can testify that they never deviate from the same approach, thus ensuring consistency. It’s advisable to remove from the room individuals accompanying a testator, such as the testator’s children or caregiver/chauffeur, and have a private conversation with the testator to confirm capacity, understanding of the documents and the absence of influence. Some planners go as far as videotaping the signing if they suspect a challenge, although this creates its own perils.
Pre-mortem validation is useful for a testator or trust settlor who suspects that a potential heir might challenge the will or trust after the testator dies. By bringing the action before death, he can ensure the evaluation of facts will occur shortly after signing the documents, thus avoiding many of the inadequacies of the will contest proceeding. The testator can testify and be evaluated, and facts should be assessed more accurately. Frivolous attacks will be deterred.
Statutes allowing a testator to petition a court to validate the will or trust vary slightly in their approach. Some prescribe a specific procedure, and others reference declaratory judgment procedures as the basis for pre-mortem validation. Thus, validation procedures vary based on applicable court rules and customs. Some statutes include language precluding the inference that a failure to file for a judgment declaring the validity of a will or trust might be construed as evidence that the will or trust shouldn’t be deemed valid.
Traditionally, one of the impediments to validating a will or revocable trust before death is that the document isn’t yet final and irrevocable. It could be changed before death, and thus the issue of whether it’s valid isn’t yet ripe or justiciable. Pre-mortem validation statutes overcome this impediment.
The Uniform Trust Code (UTC) highlights the presumption that validation should occur after death. UTC Section 604 provides an accelerated post-death validation procedure for revocable trusts that become irrevocable at the settlor’s death. It provides that an individual may commence a proceeding to contest the validity of a revocable trust three years after the settlor’s death, but that period can be shortened from three years to just 120 days after the trustee sends the individual a copy of the trust instrument and a notice informing the individual of the trust’s existence, the trustee’s name and address and the time allowed for commencing a proceeding. While UTC Section 604 is a post-mortem validation statute, the comments to UTC Section 604 acknowledge that this doesn’t preclude the settlor from pursuing a declaratory judgment during life.
Unlike the non-judicial validation statutes, judicial validation statutes don’t provide the option of targeting specific individuals who pose the threat of a contest without inviting the entire family into litigation. Additionally, judicial validation statutes have disadvantages that accompany litigation that could deter a testator from using the procedure. They require public proceedings. If capacity or undue influence is a borderline call, a judicial action could turn unpleasant, with the testator spending her remaining years in turmoil.
South Dakota and Delaware have non-judicial pre-mortem validation statutes that preclude will contests via a notice procedure and relatively short statutes of limitations. South Dakota’s statute only applies to trusts. Delaware has statutes that apply to wills, trusts and exercises of powers of appointment (POAs). Unlike will statutes that only apply to testators in that state, South Dakota and Delaware’s statutes provide a powerful tool for settlors who live anywhere who can create a trust in, or move a trust to, that jurisdiction and follow the notice procedure to avoid validity challenges. A challenge to a will, trust or exercise of a POA only goes to court when the notice recipient files a challenge with the court within the limitations period. There are other clear advantages to the non-judicial pre-mortem validation approach. It provides more flexibility, the possibility of avoiding litigation altogether, is far less expensive, can be used to target specific individuals (including non-beneficiaries) without including everyone and can avoid the embarrassment and publicity of a court proceeding.
In Delaware, a judicial proceeding to contest the validity of a revocable trust, an amendment thereto or an irrevocable trust may not be initiated later than 120 days after the date that the trustee notified the individual in writing of the trust’s existence, the trustee’s name and address, whether such individual is a beneficiary and the time allowed under the statute for initiating a judicial proceeding to contest the trust.
Delaware also has a pre-mortem validation statute for wills and the exercise of a POA under a will. A testator may provide notice of a will to any individual named in the will as a beneficiary, any individual who would be entitled to inherit under intestacy and any other individual the testator wishes to be bound as to the validity of the testator’s will. The written notice must contain a copy of the testator’s will and a statement that an individual who wishes to contest the validity of the will must do so within 120 days. Delaware’s statute is broader than others, allowing notice to go to any individual the testator wishes to bind. A notice recipient who fails to bring a proceeding within 120 days is precluded from bringing an action thereafter or from participating as a party in any similar action brought by another individual. The limitations period doesn’t apply if the testator dies during the 120-day period. There’s a similar validation procedure and 120-day time period for a testator who exercises a POA in his will.
South Dakota’s statute is similar to Delaware’s, although it only applies to trusts. It provides that an individual may not commence a legal proceeding to contest the validity of a trust later than “Sixty days after the trustee, trust advisor, trust protector, or the settlor sent the person who is contesting the trust a copy of the trust instrument and a notice informing the person of the trust’s existence, of the trustee’s name and address, and of the time allowed for commencing a proceeding.”
It’s significant that the Delaware and South Dakota statutes allow the testator or settlor to bind non-beneficiaries. This means that, unlike judicial validation statutes in which all interested individuals are parties, they can be used to bind specific individuals, even those who aren’t beneficiaries and intestate heirs. For example, if an individual or charity has never been included in the document but expects something or was included in a previous document but is subsequently removed, the notice can specifically bar a challenge by them. The pre-mortem notice can be used to flesh out challenging parties in a targeted fashion, without opening up litigation with the entire class of heirs. Both the South Dakota and Delaware statutes include provisions stating that a trustee shouldn’t have any liability for failure to institute the pre-mortem notice and that failure to use the statutes won’t be construed as evidence that the instrument isn’t valid.
A more traditional method of discouraging litigation in connection with a beneficiary’s disappointment with his inheritance is the use of an in terrorem, or no-contest, clause in the document. Ironically, the litigation-reducing rationale for including no-contest clauses in documents is often defeated, because the very inclusion of such a clause often generates controversy on its own.2
A beneficiary who receives less than the amount to which he believes he’s entitled or receives an inheritance in a way other than he anticipated (for example in trust, rather than outright) may decide to challenge the validity of a will on grounds such as fraud, duress, lack of capacity, undue influence or forgery. In an attempt to disincent the unhappy beneficiary from initiating such a challenge, the governing document may include a no-contest clause, which provides that the beneficiary will receive nothing if he challenges the validity of the document. Usually, the no-contest clause states that any beneficiary who challenges the document will be treated as if he predeceased the testator without descendants, even if the beneficiary actually has descendants. Treating the objecting beneficiary as having no descendants adds sharper teeth to the no-contest clause, because it keeps the property out of the beneficiary’s family entirely.
Traditionally, courts have upheld the validity of no-contest clauses because public policy favors a person’s right to dispose of his property on his death as he sees fit, and the clause represents the testator’s clear intent. The testator’s intent is the guiding principle of testamentary construction, and the court’s job is to give effect to that intent.
Courts also uphold no-contest clauses because they’re a method by which to avoid will contests, which breed family animosity, expose family secrets better left untold and result in a waste of estates through expensive and long drawn-out litigation. Although invasion of privacy may be the least weighty reason courts uphold no-contest clauses, it may be the most important reason clients use them.
Courts construe no-contest clauses narrowly because they result in the forfeiture of a beneficiary’s inheritance, and courts are reluctant to divest beneficiaries of their interests.
Although the no-contest clause is a valuable tool, the clause shouldn’t be part of the boilerplate of a document. Instead, drafters should include the clause only after discussing with the client his concerns about a potential will challenge after death, alternative methods of discouraging such a challenge and applicable state law. A no-contest clause will deter a challenge by a beneficiary only if the beneficiary has something to lose. If the beneficiary is disinherited completely, or left only a nominal inheritance, contesting the document will leave the beneficiary in no worse a position (except for the beneficiary’s legal fees in bringing suit), but could have significant upside if the challenge is successful.
If a client truly wants to leave nothing to a spouse or family member who’s expecting an inheritance, the client should disinherit that person completely, keeping in mind that it may be difficult or impossible to completely disinherit a spouse. However, beneficiaries who are disinherited often are angrier than those who’ve been left something other than what they expected. Accordingly, the drafting attorney should carefully document the client’s reasons for a disinheritance and be prepared to explain those reasons to the disgruntled beneficiary after the client’s death.
If the drafter and client determine that a no-contest clause is appropriate, the clause should be narrowly drafted to achieve the client’s specific goal. For example, it may make sense to apply the no-contest clause only to a specific bequest, or to a specific beneficiary, rather than the entire document. The clause also should articulate what actions will trigger its application. For example, is it only the filing of a contest that will trigger the clause, or will providing financial support to others who are seeking a contest similarly trigger the clause?
As with total disinheritance, the drafter should (if possible under the particular circumstances) either articulate in the governing document or keep detailed notes of why the no-contest clause has been included. The beneficiary’s discovery of the clause usually occurs after the person best suited to answer questions about it—the testator—has died, leaving the drafter in the unenviable position of having to justify the inclusion of the clause to the disappointed beneficiary.
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