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Do you plan to make UNEQUAL distributions to your kids? Are you worried that one or more of your children may challenge your estate plan or any particular transfer or change in beneficiary you have made, or a particular loan arrangement you have made with a child who has stepped up to help you?

If so, you may want to include a No Contest Clause (NCC) in your estate plan documents. But absent concerns like these, the clause may do more harm than good.

The NCC, which attempts to penalize beneficiaries for taking legal actions affecting an estate plan, is far too often included as boilerplate language in wills and trusts without much thought as to its purpose and effect, or to potential alternatives.

Recent legislation limits use of the NCC to three situations:

First, the clause can apply to direct contests against a protected instrument, brought without probable cause. “Direct” means the contest alleges: forgery; improper execution; incapacity; menace, duress, fraud, undue influence; revocation of the instrument; disqualification of subscribing witness; disqualified beneficiary. “Protected instrument” means: the instrument with the NCC; and any other instrument in existence at the time the NCC is executed, which is either specifically identified as protected, or part of a class specifically identified as protected, in the NCC. “Instrument” means a will, trust, deed, or other writing designating a beneficiary or making a donative transfer of property. “Probable cause” for this purpose is defined as basically more than a mere possibility but less than a preponderance of the evidence–existing if, “at the time of filing the contest, the facts known to the contestant would cause a reasonable person to believe there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation and discovery.”

The second and third ways the NCC can be used under current law are similar. Where the clause expressly provides, it may discourage challenges to a transfer of property on grounds it was not transferor’s property at time of transfer. Similarly, where it expressly provides, it may discourage creditor claims. These latter two uses are available without regard to existence of probable cause, and have been criticized because they may force an election between inheritance on the one hand, and on the other, keeping property received as a favored child, or getting repaid for a loan provided to care for an aging parent.

There are many alternatives to the common blanket all-or-nothing NCC, and these alternatives should be carefully considered.

First, you need to think about whether you even need such a clause. Most plans have them, whether needed or not, and seldom is enough thought given to the potential harm from these clauses.

Do you plan to make unequal distributions? Do you expect a challenge from anyone? Is there a particular individual or group that is more likely to cause trouble? Are any specific transactions likely to be challenged (for example, deed or beneficiary designation in favor of particular child)? Do you owe a debt to a child taking care of you, with an understanding that the debt will be repaid from the estate?

If you don’t have these situations, you may be better off going without the NCC, and splitting the estate equally between the kids.

If you ARE concerned about one or more of the above situations, then you still need to look at alternatives and decide whether the blanket, all-or-nothing approach is better.

Rather than taking the blanket approach, you may want to limit application of the clause to a single likely challenger. Or if you have in mind a specific group more likely to challenge, you may want to apply the clause against the entire group as it may otherwise be worth it for a couple of non-contesting beneficiaries to make a side deal to cover the losses of a challenger.

Rather than taking the all-or-nothing approach, you may want to have a penalty that is something less than complete forfeiture, perhaps even just shifting the costs of defense.

If you are concerned about property contests over specific known transactions, you may want to limit application of the clause to those specific transactions. You can also exclude all future transactions, and you can add a probable cause exception.

Another possible solution includes granting a third party a power of appointment to a third party with discretion to distribute to beneficiaries in any proportion deemed appropriate, and considering any trouble caused.

Finally, make sure the NCC is included in any codicils or trust amendments, as the clause only applies to instruments already in existence at execution.

There are many issues involved in deciding whether to include a No Contest Clause. Most of the time, these clauses are probably not needed. If included, there are many issues that need to be looked at carefully.