Protecting your will against challenges

Although dying has several well-recognized disadvantages, one benefit it offers is that you finally get to do what you want with your money.

Specifically, you don’t have to leave your money to people you don’t like, including some or all of your children. The one exception here is your spouse. Under the Colorado Probate Code, your spouse is guaranteed a share of your estate.

The rules for this get a little fancy, but a spouse’s right to elect against the terms of a will and take a statutory share instead starts at a 5% share during the first year of marriage and increases to a 50% share after 10 years of marriage. (No extra credit after that.)

There is, however, a risk involved in omitting someone from your will who is expecting an inheritance, or leaving such a person a lesser amount than expected. The risk is that the person left out (or left less) will contest the will in the hope of improving his or her position.

There is, however, a risk involved in omitting someone from your will who is expecting an inheritance, or leaving such a person a lesser amount than expected. The risk is that the person left out (or left less) will contest the will in the hope of improving his or her position.

A good example would be a will that leaves 40% of an estate to one child but only 10% to another child. If, following the death of the will-making parent, the child getting the 10% share successfully challenges the validity of the will and the will ceases to be effective, the laws of intestacy say both children will be treated equally.

The question then becomes: How can you diminish the risk of a challenge to your will and still do what you want with your money? Because the usual grounds for contesting a will are incapacity and undue influence, it helps considerably if you prepare your will at a time when there is no question about your mental capacity and there is no one around coaching you on what your will should say.

Those suggestions aside, another strategy involves the use of something called an “in terrorem” clause, also called (less dramatically) a “no-contest” clause. What these clauses say is this: if a person challenges the will and loses, that person forfeits whatever he or she would have received under the will.

Therefore, for a person who is named in a will to receive something but who is not happy about the amount, an in terrorem clause turns a will contest into a high-stakes gamble. If the challenge is successful, the contesting party gets more; if the challenge is unsuccessful, the contesting party loses the inheritance provided for in the will.

In Colorado, in terrorem clauses are enforceable. But there is an important string attached. If there is “probable cause” to challenge the will, an in terrorem clause will not be effective even if the challenge is unsuccessful.

However, to establish probable cause, an unsuccessful contestant must prove there was a substantial likelihood the contest would be successful. Scholarly legal analysis (to say nothing of common sense) suggests that proving a substantial likelihood of success in a case you just lost will be difficult, which adds support for the proposition that in terrorem clauses can in fact achieve their intended purpose of reducing the risk of a will contest.

As you might expect, an in terrorem clause has no deterrent effect on someone left out of a will entirely. A person in that position has nothing to lose (other than legal expense — admittedly a deterrent in its own right) by mounting a challenge to a will. Thus, to be effective, an in terrorem clause needs to leave the person you think might contest your will an amount that would be painful to walk away from in the event of an unsuccessful challenge.