“No-contest” clauses are popular features of many wills. A no-contest clause (also called a forfeiture clause) states that if a beneficiary of the will tries to dispute anything in the will, that person will no longer be entitled to inherit under the will. Courts have upheld this type of clause in wills. Can the same type of clause be included in a revocable living trust? According to a recent Virginia case, the answer is yes. This case also examined what constitutes a “dispute” of the trust to trigger a no-contest clause.
In Keener v. Keener, Hollis Keener set up a trust-based estate planning, including a typical “pour over will” that left his property to a revocable living trust. A pour over is a special type of will designed to transfer one’s property into a trust upon the testator’s death. These wills are typically used as a safety-net in estate plans designed to avoid probate.
Hollis was the original trustee of the living trust. Two of his sons were named as successor trustees. The purpose of the trust was to avoid probate, maintain privacy, and give Hollis more control over the distribution of his assets. Upon Hollis’ death, the trust required the trustee to distribute the trust assets to his 6 children in equal shares.
There was some acrimony in the family. Deborah (Hollis’s daughter) found the will and trust documents and made copies of them. A few weeks later, Hollis added language to the trust, stating that if any person objects or contests any provision of the trust at his death, then his or her portion of the trust shall be forfeited. This is a typical no-contest clause, which would normally appear in a will. But since Hollis was using a revocable living trust, the trust was the primary dispositive instrument. This no-contest clause was added to the trust only; it was not added to the pour-over will.
Upon Hollis’ death, the trustee (his son) did not offer the will into probate believing it was unnecessary since everything poured into the trust, from which distribution to the trust beneficiaries was to be made. As with most trust-based estate plans, there was no need to probate the will since all assets were owned by the trust and distributed in accordance with the trust.
When Deborah went to the local courthouse to determine if her father’s will had been entered into probate, she found that it hadn’t. She tried to enter the copy of the will she had made years before, but the court rejected it because it was not an original. Two of her siblings then told her there wasn’t a will. So Deborah applied to have her father’s estate administered, claiming he died intestate (meaning, without a will). She was named administratrix of her father’s estate.
While Deborah was pressing to open her father’s estate, the trustee of the revocable living trust issued 6 checks distributing the assets of the trust to his siblings. But when he learned that Deborah was seeking to open his father’s estate, he stopped payment on her check and claimed she violated the trust’s no-contest clause.
The first issue before the court in this case was whether or not a no-contest clause, such as those found commonly found in wills, could be upheld when included in a trust. A no-contest clause is a way for a testator to ensure that his heirs don’t object to his wishes as to the distribution of his property. While these clauses are typically used in wills, the same rationale applies to trusts. The court found no reason to invalidate no-contest clauses in trusts, especially since they also deal with the distribution of one’s assets according to his wishes. The court held that the no-contest clause in the revocable living trust was valid.
This did not resolve the case, however. Once the no-contest clause in the trust was found to be valid, the next question the court had to answer was whether Deborah’s conduct triggered this clause. The no-contest clause specifically stated that it would be triggered as a result of objections or contesting of the provisions of the trust. The pour over will did not also include this type of clause. Deborah simply sought to open her father’s estate as a result of her claim he died without a will.
The court found that her conduct did not specifically contest to any provisions of the trust itself. As such, the no-contest clause of the trust had not been triggered. Had the will itself had a similar clause, the answer may have been different.
This case shows the importance of having a properly-drafted estate plan. If you are potentially involved in a will or trust dispute, it is a good idea to consult with a probate attorney before committing any acts that may result in forfeiting your inheritance or trust distribution rights.
Keener v. Keener, 682 S.E.2d 545 (Va. 2009).
About Jeramie Fortenberry
