Most people building an estate plan around real estate are thinking about taxes. The lawyers who clean up afterward are usually thinking about something else: whether the family is going to sue each other. Jason Gaudy, an estate planning and probate attorney at Gaudy Law in Upland, California, splits his practice roughly 50/50 between planning work and what his office calls contested cases. He says the fights are rarely about what people assume.
What do people actually fight over?
Not always the money. Gaudy says he has seen families go to war over a single house, and go to war over many houses. He has also watched people fight over photographs, ashes, and paintings that were worth nothing.
His conclusion is blunt: if people want to fight, they will find a reason to fight. The size of the portfolio is not the variable that decides it. In one case he handled involving 16 properties spread across a blended family, the conflict level between the children was very low. They got along. Meanwhile, plenty of single-house estates end up in front of a judge.
Structure reduces the opportunities for conflict. It does not change the people.
What are the grounds for contesting a trust?
A trust contest is not a general appeal to fairness. In Gaudy’s practice, the claims that go anywhere fall into three buckets:
– Lack of capacity. The person signing had dementia, Alzheimer’s, or was otherwise not competent at the moment of signing. – Undue influence. Someone, often one of the children, pressured or manipulated the parent into changing the document. – Forgery. The signature is not theirs.
He described a caller whose father’s original trust left everything to him and his sister. Shortly before the father died, an amendment appeared cutting the son out. The father had been in the hospital for cancer treatment, in and out of consciousness, and nobody could say who notarized it. Gaudy’s office filed a contest.
In another matter he is litigating now, his firm hired a handwriting expert. The signature on the trust that disinherited the client matched nothing the man had ever signed, from his driver’s license to his applications and letters. It was a big, fancy signature; his real one was a small scratch.
Does a no-contest clause stop this?
Almost every trust has one, Gaudy says. The clause does what it sounds like: if you challenge the document and lose, you forfeit whatever you were going to receive.
The weakness is arithmetic. In the hospital-amendment case, the son had been left so little that the clause had no teeth. He was not risking much by suing. As Gaudy puts it, people are often already disinherited, so why not go for it? A no-contest clause disciplines beneficiaries who have something real to lose. It does very little to a person who has already been written out. Gaudy also notes there needs to be good cause behind a contest, which is why the three grounds above matter so much.
Why the cost is the real barrier
Contests are, in Gaudy’s words, hard to prove and very, very expensive. Handwriting experts, medical records, depositions, and years of calendar time add up fast. His office takes some of these on contingency depending on the fact pattern, precisely because the person calling usually cannot fund the fight.
The conversation he describes having over and over: the disinherited kid asks what he is supposed to do, because he does not have a hundred thousand dollars to pay a lawyer, and does not understand why he should have to.
Compare that to the baseline. Gaudy puts average California probate fees around $15,000 to $20,000, before the administrator’s fee and court costs, with the estate held open about a year. Litigation on top of that is a different order of magnitude. The delay itself is corrosive: if two siblings are already at odds, the surest way to make it worse is to let it drag out.
Part of his job in contested cases is telling clients when to stop: here is what continuing will cost, and it is not worth it. He notes that is a hard message to hear from inside the fight, when anger is doing most of the thinking.
A well-drafted plan is not immunity
The uncomfortable finding from his caseload is that good drafting does not guarantee peace. Gaudy says he has seen a very well drafted plan end up in litigation simply because the people did not like each other.
Where he does see a controllable pattern, it is usually the trustee choice. A lot of his trust litigation involves estates that had a valid trust, and the problem was that the wrong person was named to run it. That is a design decision, not bad luck. It is covered in more depth in when to name a professional trustee instead of a family member.
What this means if you’re planning a 1031 exchange
A 1031 exchange defers the tax; it does not settle who gets the property. If your exchange lands in a single replacement building that three heirs are expected to share, you have created the exact asset that is hardest to divide and easiest to fight about. That is one reason some sellers look at fractional ownership: a Delaware Statutory Trust interest is held in fractional amounts rather than as a whole building, which changes the division math. It carries its own tradeoffs, including illiquidity and loss of control (see DST risks, fees and downsides).
Watch: When Estates End Up in Court: The Real Cost of Trust Litigation with Jason Gaudy, Gaudy Law
Educational only. Not legal, tax, or investment advice. Jason Gaudy is licensed in California; rules vary by state. Consult your own advisors.