K.M. Khan Law, P.C.

Legal thoughts and analysis from Old Town's Country Lawyer

Category: Wills

The No Contest Clause: Protecting your estate from unhappy heirs

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Attorneys love fancy Latin terms. At the end of many wills and trusts, you will usually find a section we proudly call the In Terrorem Provision. Most people will generally refer to such a provision as a “no contest” clause. The intent behind such a term is to dissuade your potential beneficiaries from bringing a frivolous lawsuit. Read more about what these clauses are, how they work, and how they should be used.

What is an In Terrorem Clause?

In terrorem is a Latin phrase that means “to frighten.” The purpose of a no contest clause is to serve as a deterrent to lawsuits brought by a person’s unhappy beneficiaries against his estate. Basically, if an heir challenges his inheritance and loses, he will be disinherited completely and receive nothing from the estate at all!

While this all or nothing approach seems harsh, the policy behind these clauses is to minimize selfish bickering between dissatisfied beneficiaries and the estate while also reducing the need for costly and time-consuming litigation. The United States Supreme Court upheld the use of no contest clauses in Smithsonian Institution v. Meech. In this case, the testator – the creator of a will – left the majority of his estate to the Smithsonian Museum and only a few token gifts to his other relatives. When a suit was brought by these relatives alleging that the gift to the Smithsonian was improper, the Supreme Court did not agree. It found that a person cannot receive a gift from a will while simultaneously challenging its provisions. Further, such a clause preserves the testator’s true intentions and donative intent, especially now that the person is not here anyore to speak for himself.
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Dividing the Family Jewels: How to pass along your most personal belongings

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When most people first start working on their estate plan, they focus on their biggest assets such as their home, rental properties, retirement accounts, and other financial investments. However, sometimes the most important items to your family members are those with the most sentimental value: your grandmother’s wedding ring, your father’s watch, family photo albums, your favorite painting, an antique hunting rifle. Things such as these have significant sentimental value associated with them, which can make them valuable keepsakes for your children and other heirs.

A will in Virginia should cover these assets in detail. The use of a broad residuary clause will pass these items in large general shares. However, you are then placing the burden on your executor or trustee to divide these items equally amongst your beneficiaries. Read below on some potential techniques to reduce conflict and ensure that your family heirlooms go to those who will appreciate them the most.

Tangible Personal Property Memorandum

One of the best ways to pass along such keepsakes is the use of a Tangible Personal Property Memorandum. Under Virginia law, a separate writing can be incorporated into your will listing these items and their intended beneficiaries. This document does not have to be prepared at the same time you sign your will. In fact, you can create it after your will has been signed and continually update it as you need to without necessarily having to consult with an attorney.
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Will or a Trust: Which is better for your situation?

Many people have heard of a “will” and a “trust,” but are unsure which estate planning device would be best for them and their needs. Both serve the same general purpose, the distribution of your assets in an organized and efficient manner to your loved ones. However, each document has certain advantages and disadvantages. Keep reading to see the key differences between these two estate planning options and what considerations you should take into account when deciding between the two.

Administrative Effects

A will is only effective upon your passing. This means that whatever gifts you have provided for in your will do not take effect until you have actually passed away. Issues arise when property is left to someone in the will, but is then actually given or sold during the will maker’s lifetime. Such a transaction is an abatement; the property is no longer covered by the distribution scheme of your will.

On the other hand, a revocable living trust is created during your lifetime. As soon as you sign the trust document, it is effective. Therefore, to take full advantage of your trust, you must transfer your property into it such as your personal residence, savings accounts, and other significant assets.
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