Indiana recently enacted a change to the probate code allowing a person to include a “no contest” clause in their estate plan. This change has prompted many questions, and affords us the opportunity to de-bunk some old myths about such things.
It may or may not be a difficult decision to disinherit a member of your family, and such actions are often the source of sleepless nights. You’ve heard all sorts of stories of estate planning gone wrong … the neighbor whose family fought in court for months/years after their death, only to end up with nothing because the attorneys’ fees depleted the estate … the friend at work whose siblings are suing them over their parents’ estates … etc., etc., etc.
You may have also heard that the best way to “disinherit” someone is to leave them a dollar. I’m not sure where this idea originated, and it seems to have achieved the level of “common wisdom”. Unfortunately, it could cause more problems than it solves.
Leaving someone a dollar is much more likely to create an unintended consequence than disinheriting them completely under Indiana’s new law.
Indiana’s law, as of July 1, 2018, states (in part):
IC 29-1-1-3 (a)(22) defines a no contest provision as follows: a provision of a will that, if given effect, would reduce or eliminate the interest of a beneficiary of the will who, directly or indirectly, initiates or otherwise pursues: (A) an action to contest the admissibility or validity of the will; (B) an action to set aside a term of the will; or (C) any other act to frustrate or defeat the testator’s intent as expressed in the terms of the will.
IC 29-1-6-2(a) provides that a no contest provision is enforceable according to the express terms of the no contest provision. [with certain specific exceptions].
So, what does this mean, and why not leave $1? Put simply, the enforceability of a no contest clause is limited to those persons or entities to whom you have left an inheritance in your will or trust (a “beneficiary”). Therefore, the clause means that any beneficiary must weigh the possible benefit of a will contest against the potential loss of their inheritance. It’s a risk analysis, and if they are slated to receive $1.00, you’ve made the decision easy for them. Whereas, if they have received a larger bequest, they will (theoretically) be deterred from filing a contest because of the risk of loss of that bequest. The tricky part here is determining that amount which fulfills the purpose.
As for those who have been completely disinherited, the new law does not apply. They are not “beneficiaries” of your will or trust (because they have been disinherited), and thus, are not subject to the no contest clause. However, it is still advisable to disinherit completely as opposed to a $1.00 bequest, which would likely incite a contest – exactly what you were trying to avoid.
While this may be a bit confusing, rest assured that we are working to protect you and your plan.
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