Understanding How You Can Protect Your Wishes as Recorded in Your Estate Plan

When you make the decision to create an estate plan, you likely put a lot of time and thought into getting that plan into place and making sure that it accomplishes exactly what you want. For this reason, almost anybody who puts in the effort of establishing a plan would also want to be sure that their wishes are protected from being undone after they’re gone. Depending on the laws in your state, a “no-contest” clause may be a viable solution.

“No-contest” clauses, also known as “terror” clauses (or, in some cases, by the Latin “in terrororem”,) are provisions inserted into estate planning documents like will or trusts. They state that, if a beneficiary under that document goes to court to challenge the legal validity of the document, and loses, then that beneficiary, regardless of what the plan document originally said, receives nothing.

These clauses can be very effective in some cases. For example, assume that your estate plan leaves one of your beneficiaries the flat sum of $75,000. Also assume that, if your estate plan were ruled invalid by a court and your assets were divided up according to your state’s intestacy laws, that same beneficiary would receive $250,000. A “no-contest” forces that beneficiary to consider carefully whether or not she can win in court, as a defeat in court means loses a significant sum — that being the $75,000 distribution.

A well-drafted “no-contest” clause will likely differentiate between a beneficiary who files a court challenge seeking to invalidate your estate plan and one who goes to court seeking a clarification of some aspect of your plan that is unclear. Even carefully drafted plan documents can sometimes have provisions that are ambiguous or vague. Most people would not want to punish their beneficiaries for asking a judge to make a ruling that clarifies a confusing provision, assuming that the beneficiary is not asking the judge to throw out the plan entirely.

Legacy-Assurance Plan-Eldery-lady-with-shopping-bags3

It is important to bear in mind that “no-contest” clauses are not legal in all states. Some states have decided that they violate public policy and have declared that they are unenforceable. In some states, the enforceability of a “no-contest” clause depends on whether the clause is placed in a will or a living trust. In Michigan, for example, the legislature passed a law declaring “no-contest” clauses in wills unenforceable. Because the law didn’t mention living trusts, the state Supreme Court there decided a few years ago that “no-contest” clauses in living trusts are allowable. So, if you live in Michigan (or a state whose law mirrors Michigan’s,) and you want to protect your wishes you’ve set up in your plan, you may want to consider utilizing a living trust in order to gain the added benefit of a valid and enforceable “no-contest” clause, in addition to the other potential advantages offered by a living trust.

Summary: “No-contest” clauses can serve important purposes in protecting the wishes you’ve enshrined in your estate plan. These clauses may provide a power financial disincentive that discourages disgruntled beneficiaries from using the courts in order to invalidate your plan and obtain a larger portion of your wealth as a result. “No-contest” clauses are not legal in every circumstance, however. The laws in your state may not allow them. In some states, “no-contest” clauses are allowed in living trusts and not in wills, which may provide an addition reason for residents of those states to consider using living trusts.

How Legacy Assurance Plan To Estate Planning Can Help Your Blended Family

Whether a first marriage ends due to death or divorce, a second marriage can represent an wonderful opportunity for you and your new spouse. With these second marriages often comes the “blended family,” so named because your new marriage involves blending the children you, your spouse (or both of you) have from a previous marriage. In order to protect the financial well-being and happiness of everyone in your blended family, you should strongly consider engaging in prompt and comprehensive estate planning.

Estate Planning for a Blended Family

Blended families present a unique set of estate planning issues. In some cases, you may wish to leave inheritances to both your children and step-children, but perhaps give a larger share to your biological children. In other instances, you have a very close relationship with your step-children while maintaining little to no relationship with your biological children.

Divorce-Remarriage-And-Estate-Planning-How-A-Blended-Family-May-Affect-Your-Children’s-Inheritance

In either circumstance, you can create these legacies, in whatever proportions you see fit, in either a will or a trust. If you desire to disinherit your biological children and leave an inheritance to your step-children (and have not legally adopted your step-children,) this may require especially careful planning, in order to protect against court challenges to your will or trust.

Perhaps the most common concern, though, doesn’t involves not “his” or “hers” estates, because many couples in second (or subsequent) marriages have merged the majority of their assets. The concern, then, involves what happens to those assets when the first spouse dies. Some families may be fearful that the children of the first-to-die spouse could lose their inheritance if their step-parent alters the terms of the estate plan to “freeze” them out.

Estate Planning for a Blended Family 1

In these cases, the use of trusts may be particularly helpful. A couple with a blended family may choose to create two individual living trusts, instead of one married trust. Because trusts can be broadly customized to meet their creators’ needs, a living trust can serve to protect both a grantor’s spouse and his/her children. As an example, a living trust for a spouse with a blended family may give instructions that the assets within it are, after the grantor dies, to be used to support and benefit the surviving spouse during the rest of his/her life, and then distributed to the grantor’s children.

Blended Family -Estate-Planning

Alternately, if each spouse is sufficiently wealthy, the trust may dictate that the assets be distributed to the children immediately upon death. You also have significant flexibility in who is the trustee of your trust. You could, for example, name your spouse and one or more of your children as co-trustees, to ensure that both segments of your blended family have a voice in the decision-making process.

Summary: Blended families are more common than ever, now outnumbering traditional families. These families have unique and sometimes complex estate planning needs to ensure that the legacy each spouse desires to leave may come to pass. Using trusts, possibly including multiple trusts, may help a blended family provide for both the surviving member of the marriage, as well as each spouse’s portion of their blended family.

Legacy Assurance Plan Of America – Take Steps Now To Help Reduce Risk Of Legal Challenges To Your Estate Plan After You Die

Legacy Assurance Plan of America’s for Estate Planning –  When famed actor Mickey Rooney died earlier this year, some reports estimated his estate to be worth as little as $18,000. That, however, did not stop Rooney’s family from fighting about the actor’s will. This is not necessarily surprising as, sometimes, it is the smallest estates that produce the biggest estate battles after the testator dies.

Medical Team Transporting Patient to Helicopter

 

So, what can you do to avoid a messy situation or painful showdown over your assets after you die? One thing is to communicate with your loved ones. By sharing your wishes with everyone affected by the terms of your will or living trust, you can minimize the chance of an uncomfortable surprise. You should also be certain that your estate planning documents communicate clearly about why you made your choices. If you are leaving a loved one nothing because you gave that person gifts of significant value during your lifetime, spelling out that reasoning can potentially be beneficial, both for that loved one and for a court, if a legal challenge occurs.

6a017d3bf4b660970c01a511f749ee970c

You should clearly mention all of your children, and make some provision for them. Even if you do not wish to leave them an inheritance, leaving them a nominal amount, such as $1, may help avoid problems. That’s because, if you make no provision for a child, he/she can claim in court that the omission was an oversight, and that he/she is entitled to a fraction of your total estate in accordance with the portion stated in your state’s statutes.

Both wills and living trusts can be challenged in court. These cases are generally difficult for the challenging party to win. The person mounting the challenge must show that you were mentally incompetent when you created your will or trust, that you were under the improper influence of another person when you made your will or trust or that your estate plan was the product of fraud. Communicating clearly about the goals, objectives and reasons for your plan is especially important if you are disinheriting immediate relatives, are providing a substantial inheritance to distant relatives or non-relatives, or maqke changes to your plan on your “death-bed.”

ProbateAndAdministrationFAQs_204526183 333

If you are concerned that a loved one may be dissatisfied with the size of his/her inheritance, one possible option is a “no-contest” clause. A no-contest clause potentially dissuades beneficiaries from challenging your estate plan by saying that, if a beneficiary goes to court, then that beneficiary does not get his/her inheritance, but instead gets a nominal amount, like $1. No-contest clauses are not legally enforceable in all states, however.

Summary: There is no such thing as a “bulletproof” estate plan that cannot be challenged in court. However, there are steps, both legal and non-legal, that you can take to reduce the likelihood that anyone would choose to challenge your plan and you can get help from Legacy Assurance Plan Of America. The key to most of these steps is clear communication, so that your estate planning desires and objectives, along with your state of mind, are clear to your loved ones, and to a court if your plan becomes the subject of a challenge