Monday, May 24, 2010

No Contest Clauses in Virginia: The Latest

I've posted previously about Virginia law regarding no-contest clauses in wills and trusts. As I wrote before, the Virginia Supreme Court has held specifically that such clauses are valid in wills and trusts, and should be "strictly enforced."

A Virginia Circuit Court recently enforced a no-contest clause (formally called an in terrorem clause) in a will and held that a beneficiary (wife) who challenged the will of her late husband was entitled only to $100, rather than the significant amount she would have inherited under the will she challenged. Ouch. The dispute involved a stepmother and her stepsons in multiple lawsuits over the husband/father's estate that went on for several years and made a trip to the Virginia Supreme Court. The procedural history of the dispute is fairly complicated, and her attacks on the will were indirect, but the Court found that she nevertheless was trying to get more than (and therefore dispute) what she was entitled to under the will.

The point is that if you are going to challenge a will in Virginia that has a no-contest clause, you better have a good case, or you could go through a lot of effort and end up with little or nothing (and have spent a good amount in legal costs).

Thursday, April 22, 2010

Oral Contracts To Make A Will: Possible, But Not Easy

A last will and testament is a written document, signed by the person who made it. Surprisingly, though, are situations where a person promises to "leave" something to someone after they die if the that person does something for them during their life. These are called "oral contracts to make a will" or "oral contracts to devise." A typical example: John the widower says to the neighbors, a young couple named Tom and Ann: "Take care of me and my house for the rest of my life, and I will leave you my house." Tom and Ann say okay, and spend several years doing just that. But John never makes a will leaving them the house, and ends up dying without a will. John's sole heir is his son, Luke, who lives three states away and didn't do much of anything to care for John during his later years.

Under the law of intestacy (i.e., dying without a will) in Virginia, everything John owned goes to Luke. But, Tom and Ann say, "Wait a minute, we made a deal with John, and we lived up to our end. We want the house." Luke says, "Sorry." Well, no so fast.

This is the typical situation where Tom and Ann may seek to enforce an oral contract to make a will. And what is surprising is...that Tom and Ann may win this one. Under Virginia law, an oral contract to make a will can be successfully proved. But, and it's a big BUT, you have to be able to prove the existence of the oral contract, and that you lived up to your end of the bargain, all by clear and convincing evidence (a higher burden of proof than the normal preponderance of the evidence).

AND, in order to prove the contract, you have to have a lot of evidence to prove this agreement other than your own testimony. If it's simply your word, even if it is uncontradicted, you'll lose the case.

The difference is highlighted by two cases, one a recent Virginia Supreme Court case, Virginia Home For Boys & Girls v. Phillips, and the other a circuit court case that I recently handled. In the Phillips case, Phillips had only his own testimony, all of which was essentially uncontradicted. But, under Virginia law, you have to have independent corroboration of your testimony from other witnesses or other documentary evidence. Your own testimony is not enough, no matter how credible you are or if your testimony is not in dispute.

In my case, my client testified about the agreement that his father and him reached (son would take care of father for the rest of his life, and in exchange son would get everything of his father's after he died). But we had several other witnesses who also testified that the father told them about the agreement and/or made statements that my client was to get everything after the father passed away. And we had a lot of evidence about the care that my client provided for his father.

In Virginia estate litigation, oral contracts to make a will are hard cases to win. You have to have a lot evidence - and the right kind of evidence.

Tuesday, January 5, 2010

No Contest Clauses In Wills and Trusts

No-contest clauses in wills are fairly common. A no-contest clause (the fancy legal term is in terrorem clause) in a will is a provision that states that any beneficiary named in the will who contests the will or any portion of it forfeits any property to be received by that beneficiary under the will (hence, they are also sometimes referred to as forfeiture clauses).

The obvious purpose of these clauses is to prevent family disputes and challenges to the will after the testator dies.

No-contest clauses are valid in Virginia. Some states (not Virginia, so far at least) recognize a "probable cause" exception to enforcement of no-contest clauses, meaning that if a challenge to the will was made in good faith and with reasonable grounds, the beneficiary does not forfeit property left to him in the will.

Keep in mind that the will itself has to be valid for the no-contest clause to be valid. If the whole will itself is ruled to be invalid, on the basis of the mental incompetency of the testator, for example, then the no-contest clause is no good.

In a 2009 Virginia Supreme Court case, the Court held for the first time that no-contest clauses in trusts are valid as well. No real surprise there. The case is nevertheless interesting. It involved a daughter who attempted to qualify as the personal representative of her father's estate based on the position that Dad died without a will. In fact, Dad did have a will that directed his property be transferred to a trust he had set up prior to his death. The distribution of his property under the trust was very different than under the law of intestacy. By qualifying as personal representative of her father's estate as if he had no will, daughter would significantly alter her father's estate plan by essentially ignoring the trust. But, the Court held that trying to qualify as administrator did not violate the no-contest clause in the trust. The will itself did not have a no-contest clause.

While this is probably a correct ruling from a technical legal standpoint, it highlights that it is very hard to foresee every possible circumstance that may arise after you pass away.