NO CONTEST CLAUSES ARE NOW ENFORCEABLE IN INDIANA
As of July 1, 2018, no contest provisions in Wills and Trusts are enforceable. This is a drastic change in Indiana law which has until now been one of the few states that held such provisions in Wills and Trusts to be void and of no force or effect under any circumstances. In fact, Florida is now the only state that prohibits no contest clauses.
A no contest provision, often called an “in terrorem” clause, is a provision that reduces or eliminates the interest of a beneficiary under a Will or Trust if the beneficiary brings an action to contest all or any provision of the Will or Trust. Some people may want to include these types of forfeiture clauses in their estate planning documents if they are concerned that, after they die, a certain beneficiary or beneficiaries will contest the Will or Trust. The no contest clause essentially states that if the beneficiary challenges the Will or Trust and loses, then the beneficiary (and perhaps the beneficiary’s children and descendants) will receive nothing.
Including these types of provisions in an estate plan is an attempt to discourage contests and litigation by potentially disgruntled beneficiaries. These types of provisions are effective, however, only if the potentially disgruntled beneficiaries are receiving something of value under the Will or Trust. In order for the beneficiaries to be discouraged from contesting a Will or Trust, they must feel that the challenge is not worth the risk of losing what they are to receive under the Will or Trust.
Although Indiana will now enforce no contest provisions, there are some exceptions to this new rule. For example, if a court finds that there was good cause for the beneficiary to bring the action, then the no contest clause will not be enforced.
A no contest clause should not necessarily be included in every Will and Trust. Before including a no contest clause in your estate plan, you should consider all of the risks and potential consequences, as well as alternative ways of discouraging contests of your estate plan.