A no contest clause, also called an in terrorem clause, is essentially a statement in your will or revocable living trust that threatens to disinherit an heir if he or she formally challenges the document.
This is designed to discourage beneficiaries from disputing the will or trust in court in the hopes of getting a bigger inheritance. Of course, the power behind the clause will depend upon how much the beneficiary stands to lose versus how much they could potentially gain.
In 2009, the State of Nevada beefed up its no contest clause to also include an exception for challenges brought in good faith and with probable cause. Under the new law, the statute instructs the court to enforce a no-contest clause unless the person challenging the document can show that “…a reasonable person, properly informed and advised, to conclude that there was a substantial likelihood that the will was invalid.”
A no-contest clause should be included in any will or trust. Just remember that probable cause relies on the “reasonable person” test. So if you’re intending to disinherit a family member or drastically reduce the amount he or she is to inherit, you should be very specific about your intentions and your reasoning in your legal documents.
This tells the court that it wasn’t simply an oversight and that your document reflects your true intentions.
To learn more about contesting a will or a trust, give the estate planning attorneys at Anderson, Dorn & Rader a call at (775) 823-9455.
