Vol. 79, No. 11, November
Steps to Avoid a Legal Challenge
When designing an estate plan for an unmarried couple, these steps
will help to avoid an undesirable challenge to the plan of
- Always use a self-proving affidavit in wills.1
- Take extra care in selecting witnesses. A witness called in
especially for the occasion may be more likely to remember the specifics
of the will-signing ceremony. Also, consider using three witnesses
instead of two.
- Put your office's will-signing formalities in writing and faithfully
abide by them. If questioned, you will always have the written protocol
and can attest that it was followed.
- Keep a file of evidence that the testator acted competently and
- When appropriate, a will may acknowledge the intentional omission of
blood relatives, made after careful consideration. In limited
situations, it may be wise for the testator to further explain his or
her intent in the will, in his or her own words. Note that such a
statement may invite a claim of testamentary libel. Generally, any
explanation of intent should be a positive statement about persons
included rather than a negative statement concerning persons
- A "no contest" (or in terrorum) clause will be enforced in
Wisconsin if the contestant lacked probable cause for the
challenge.2 For the clause to be a true
disincentive to a potential challenger, however, the testator must leave
bequests to potential contestants.
- Advancements and lifetime gifts are more difficult for family
members to challenge than are testamentary bequests. Gifting may be
especially appropriate for items of sentimental value.
- Advise clients to consider a revocable living trust for its inherent
advantages over a will in averting a legal challenge.
Issues in Cohabitation Agreements
When drafting a cohabitation agreement, attorneys should consider the
- Is it possible for one attorney to jointly represent both partners
or should there be separate representation?
- What is the consideration supporting the agreement?
- What are the assets and liabilities of the parties? Each party
should be fully aware of the other's financial situation.
- Will assets be co-owned?
- Are there any coparenting issues?
- How will the parties handle living expenses (mortgage payments,
food, utilities, and so on)?
- What happens when one of the parties dies or the relationship
- How will disputes be resolved? Is mediation or arbitration
- How do the parties feel about confidentiality, especially as to
their respective assets and liabilities?
- What happens if circumstances change? For example, what if one party
gets a large inheritance, loses a job, or becomes disabled?
Cohabitation Agreement Scenario: "A Taxing
The following example highlights the trade-off between income-tax and
Heather is a high wage earner with many assets. Heather's partner,
Larry, is a low wage earner with fewer assets. Heather and Larry pool
their incomes and share living expenses in part to prevent Larry from
drawing down his estate. Their arrangement creates gift-tax liability
for Heather. They execute a cohabitation agreement based on mutual and
adequate consideration. It obligates Heather to provide ongoing support
to Larry in exchange for household and business services. Larry will owe
income tax on payments received; however, Heather's obligation
alleviates much of her gift-tax burden (subject only to questions as to
the valuation of Larry's services). The agreement also defines Larry's
property rights in the event of a dissolution or on Heather's death or
disability. Meanwhile, acknowledgements made in the agreement reduce the
likelihood that either party could raise a claim to invalidate its
provisions, such as a claim of unjust enrichment1.
Investment Property Scenario: "Larry the
In the example in Figure 3, rather than Heather paying income to
Larry in exchange for services, the couple purchases an apartment
building in Larry's name. Heather would play only an initial role. She
could use some of her lifetime exemption to give Larry funds to buy the
building, or perhaps guarantee the loan used to pay for it. Thereafter,
the building would remain in Larry's estate, earning him both income and
equity over time. Depreciation deductions could offset Larry's
income-tax liability. Any unjust enrichment claim by Larry (based on his
provision of services) would likely fail because of Heather's assistance
in purchasing the building.