Preventing Squabbles Over a Will With No-Contest Clause

When Frank Sinatra drafted his will, he made sure that his heirs would accept their inheritance his way. Before Jerry Garcia died, the Grateful Dead guitarist took steps to promote peace among his survivors once his truckin' days were over.

How? Both entertainers included "in terrorem" provisions in their wills.

The in terrorem provision, known less formally as a "no-contest" clause, is a paragraph or more of legal boilerplate aimed, as its Latin name implies, to scare off legal challenges by heirs who don't feel they've been given their fair shares of the enchilada.

In essence, the provision states that if you contest this will or trust, you forfeit your inheritance. In fact, to continue with the spooky theme, typical language instructs the court to consider contentious heirs as having died childless before the deceased.

If a challenge is successful, however, the entire will, including the in terrorem clause, would be revoked and the estate would be divided according to the state's rules of "intestacy" (as if a will had never been made) or according to a prior valid will.

Think of it as a "deal or no deal" proposition from beyond the crypt: Do you want to accept the inheritance you've been given, or go for more and risk losing it all?

"Where you stand to gain is if you don't get as much under the will as you would if there were no will," says Mary Randolph, author of The Executor's Guide."

"So the only people who are going to sue are people who stand to inherit if there is no will," she says. "Often it's the closest surviving relative. If someone dies without a spouse or surviving children, it could be a niece or nephew who is next in line."

Gerry Beyer, professor of law at Texas Tech University School of Law, says it takes equal parts psychology, mathematics and measured generosity to use an in terrorem provision effectively.

"You've got to give the person you're trying to 'disinherit' a nice chunk; you've got to give them enough so that they'll be too afraid to risk losing it," he says. "You can't leave them $100 if they could get $5,000 or $50,000 in intestacy. You've got to scare them or it won't work."

Let's step into the laboratory and see how a skilled estate planner might instill terror in the hearts of unworthy heirs, shall we?

Heir maneuvers

State probate courts have taken an inconsistent approach to in terrorem provisions in wills. Beyer says that a few states (notably Florida) do not recognize the clause at all. While most states do honor and enforce in terrorem provisions, they do so with varying degrees of rigidity based on case law and/or state statutes. Some states, for instance, will allow an unsuccessful legal challenge without disinheriting the plaintiff if the suit was brought in good faith and with probable cause.

"Some states, you can sue without triggering the no-contest law," he says. "On the other hand, you don't want to create the situation where someone who unduly influences the person inserts a no-contest provision into the will to bully the family or other potential claimants."

Legal challenges to wills are rare, and successful challenges rarer still.

"There just aren't that many reasons to contest a will," says Randolph. In general, you have to show that: a) the person lacked capacity (i.e., wasn't aware of his or her actions); b) was unduly influenced or c) the will is improper (i.e., forgery was involved).

Courts typically rule against line calls, choosing to protect the rights of the deceased to distribute their estates as they saw fit.

In fact, in three states -- Arkansas, North Dakota and Ohio -- you can appear in an "antemortem" probate proceeding and have your will deemed valid while you're still alive and kicking. If you want to further bulletproof your will against likely challenges, you can videotape yourself preparing the will and include a doctor's assessment of your mental clarity as evidence of capacity.

"The procedure is not used that often because most wills are not contested, but in situations where they fear a contest, this is the absolute solution, it's a done deal," says Beyer.

A no-contest clause comes in handy when you're willing to give something to a disgruntled heir that is short of what his or her full share might be in the absence of a will.

Here's Beyer's example:

Say you have a $1 million estate, your spouse predeceased you and you have two sons -- Bob, whom you love, and Doug, whom you loathe. If you leave three-quarters of your estate ($750,000) to Bob and one-quarter ($250,000) to Doug, your bad seed may be upset because he didn't get the 50-percent share ($500,000) he could expect had you died intestate (without a will).

However, if Doug were to hire a lawyer on a contingency basis, which is par when contesting a will, it's going to cost him up to 40 percent, or $200,000, if he's successful, leaving him just $50,000 richer. Will he risk losing $250,000 to make an additional $50,000? Not likely.

The in terrorem provision is a poor substitute for communication when it comes to healing family wounds or preventing further blood-feuds.

"If you think you need one for a particular situation or person, there is probably a better way to take care of the issue rather than to rely on the no-contest clause," says Randolph. "A common situation involves the surviving spouse and children from a previous marriage, where there's tension about who's going to get the money now. If you talk to the family beforehand and say 'Here's what I'm doing' and why, that could forestall things rather than just hope that you'll scare them off with a no-contest clause."

Jay MacDonald is a contributing editor based in Austin, Texas.

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