I was just reading a question on a legal question-and-answer website about contesting a living trust. The inheritance for the beneficiary of the trust had been significantly reduced, and the questioner wanted to know who pays for attorney’s fees and costs in an unsuccessful contest. I felt I should write about this because there can be severe consequences for contesting a living trust.
Many living trust documents, including wills for that matter, have what we call no-contest clauses. Here’s what the decedent meant in that no-contest clause: “Hey, if you contest any of the provisions or gifts that I’ve made in my living trust or other estate planning documents, you will get nothing—as if you basically had died before I did—and you’re not gonna get anything.” Here are some exceptions to the no-contest clause that might appear in a living trust document:
• If a beneficiary paid the final expenses of the decedent and has to file a creditor’s claim to be reimbursed for those expenses
• For probable cause if there was evidence of undue influence, fraud, or other things that would preserve a beneficiary’s gift in a previous version of a living trust or will
• Note: There may be provisions in the trust agreement that the beneficiary has to pay attorney’s fees and so forth for a failed contest.
The bottom line of this story is that before you decide to contest a living trust or will, you should speak with an attorney who can review the trust document or will and analyze your individual situation. Trust and will contests are notorious for being relatively expensive. You need to carefully analyze the situation and make a cost-benefit analysis to determine if challenging the living trust or will is worth the risk of possibly losing your gift under the instrument.
