When Harry Met Sally: A Lesson in Preventing Family Discord, 05-31-2010

The American Declaration of Independence begins “We hold these truths to be self-evident, that all men are created equal . . .” While this may hold true for people and their rights, all Trusts are definitely not created equal.

Seemingly small differences in wording can make a big difference in reality. For example, one Trust may have a “No Contest” clause while another Trust might not. A No Contest clause provides that if someone unsuccessfully contests the validity of the Trust, negative consequences ensue. Typically, the clause will provide that the unsuccessful contestant is disinherited or treated as though he or she died before the person who created the Trust. Such a clause can effectively convince people that it is not worth challenging your Trust.

Let’s look at what happened when Harry met Sally. They hit it off immediately and soon decided to marry – it was a second marriage for both of them. They each had children from their prior marriages, Sally had an 11-year-old son, Billy, and Harry had two daughters, Susan 13 years old and Michelle 15 years old.

When they married, Sally entered the relationship with several million dollars and Harry entered it with more modest means. When Sally prepared her estate plan, a Living Trust, she wanted to share her wealth equally among all three children and left them equal parts of her estate. After a loving, caring relationship that lasted many decades, Harry passed away.

When Sally passed away several years later, her son Billy, now in his 50s, contested her Trust. He did not want to share his mother’s wealth with his step-sisters. Billy’s contest ended up costing Sally’s estate hundreds of thousands of dollars in attorney fees, court costs and legal expert fees. When the dust finally settled, all the children ended up sharing a much-reduced pie – a very unfortunate result. Worse, the emotional scars from the litigation never healed and the children have no relationship as the result of Billy’s actions.

Unfortunately, Sally could have avoided the battle that tore her and Harry’s family apart. If she had included a No Contest clause in her Trust, Billy probably would not have contested his mother’s estate plan and risk his share of her millions.

Consider using a No Contest clause, especially in the following situations:

• Substantial wealth
• Remarriage, especially later in life
• Unequal distribution among your children
• Unusual distributions

While No Contest clauses are not valid in every state, they can be a great way to reduce the risk that your wishes will be challenged. Be sure to seek the advice of an attorney at Morris Hall, who focuses his or her practice in estate planning when preparing your estate plan. Only a knowledgeable, experienced estate planning attorney can advise you on the best estate plan for your situation – request a free consultation here.