How to stress test your estate plan

Your doctor conducts a stress test to ensure your heart can still function well even when under stress. It's a good idea to also stress test your estate plan by taking steps to strengthen it to handle any legal challenges that could happen after you pass away.

Steps to stress test your estate plan

Take the following steps to be sure your estate plan to better protect your estate plan from potential contests to your will.

• Include a no-challenge provision. "All wills should include a no-contest provision drafted in accordance with state law," says Somita Basu, founding principal and partner with Norton Basu LLP in Santa Clara, Calif. "These provisions generally state that any beneficiary who challenges their distribution in the will cannot inherit under the terms of the no-contest provision." This reduces the chance that anyone will attempt to challenge your will. Note that challenge provisions are not valid in all states, so check your state laws.
• Document your competency. "The times estate plan challenges are upheld is when there is a question of whether the creator was competent enough to execute their documents," says Stefanie Trinkl, founder of Trinkl Estate Planning SC in Milwaukee, Wisc. "If there is any doubt as to your level of competency to execute a document, such as a brain injury or early dementia, it can be very helpful to obtain a statement from your doctor or psychologist stating that they evaluated you and believe you competent to execute documents."
• Execute your documents in accordance with state law. Making sure you exactly follow your state's requirements for typed wills, witnesses, signatures, and notaries drastically reduce the chance that someone could challenge the will's legal validity. "Never have your notary also sign as a separate witness, and always have your document witnessed and notarized by people who are not related to you," Trinkl says.
• Create a living trust. A living trust can be much more difficult to challenge and Basu points out that in many states "people who are not beneficiaries under the living trust and are not direct relatives of the deceased are not entitled to a copy of the trust," which limits exposure for contests.
• Provide reasons for disinheritance. If you are disinheriting a family member who would expect to inherit, adding a brief reason in your will can be smart. Trinkl suggests that explaining your reason, such as "a lack of interest they took in your life, or their poor financial decision-making skills, gives the court evidence that the decision to disinherit them was thought out and deliberate, not just a mistake or moment of confusion." Stephen W. Buckley of Goldstein, Buckley, Cechman, Rice & Purtz PA in Fort Myers, Fla., disagrees with this approach. "If you put something in the will about why you have left someone out that someone can dispute, it can result in a lawsuit," he says. "Say, for example, you say you haven't seen someone in 10 years and are leaving them out of the will for that reason. If that person can say, yes, I saw them last month, it leaves the will open for dispute. It's better to acknowledge the person in the will and indicate that you have chosen not to include them, without saying why."
• Consider writing a letter with the reasoning behind your will. "Writing a letter that explains your choices can help the people you leave behind understand your thinking at the time you created your estate plan," Basu says. This kind of letter is not legally valid—only your will can be used to determine your wishes—but it can be helpful if you fear relatives will have difficulty understanding your decision. If you do write such a letter, be sure to update it if you update your will. Trinkl advises against such a letter saying it is best to include your reasoning only in the will itself.
• Offer reasons for your guardian choice. If you have a minor child for whom you are appointing a guardian, include clear reasoning for why you've chosen someone but note that the court will make the final decision. Trinkl suggests that including "a list of the people you would NOT want to serve as a guardian and specifically why not will help keep unwanted relatives from challenging your decision."
• Clearly identify loans and gifts made during your lifetime. Trinkl explains that, if you do not do so (by reporting gifts on your tax return and creating formal loan documents), beneficiaries could argue that a gift was a loan, "which would reduce the share of the distribution coming to that recipient from the estate." If it was a loan, it should be repaid to the estate.
• Keep it simple. The simpler your trust or last will, the less room there is for interpretation and legal challenges. "A plethora of conditions attached to distributions can be difficult to interpret and enforce. The more complex your distribution provisions, the harder the estate will be to administer and distribute, and the higher the chances of litigation and a fallout in relationships between beneficiaries," Basu explains.

Doing a stress test on your estate plan now can help make it will stand up to challenges after you are gone.