No contest clauses, also known as in terrorem clauses, are provisions in wills or trusts that penalize beneficiaries who challenge the validity of the document. So, are no contest clauses enforceable? The answer is that it depends. While these clauses are legal in many states, their enforceability can be subject to legal challenges and considerations. Read on to learn more about the potential challenges and legal implications of no contest clauses.
What is a no contest clause?
A no contest clause, also called an in terrorem clause, is a provision in a will or trust that penalizes beneficiaries who challenge the validity of the document. The penalty can range from disinheritance to a reduction in the amount of the inheritance. The purpose of these clauses is to discourage beneficiaries from challenging the validity of the document and to ensure that the testator’s wishes are carried out. However, the enforceability of these clauses can vary depending on the state and the circumstances surrounding the challenge.
Understanding the Enforceability of No Contest Clauses.
No contest clauses can be a useful tool in estate planning, but their enforceability can be complex. The laws surrounding these clauses vary by state, and the circumstances surrounding the challenge can also impact their enforceability. In general, courts will enforce no contest clauses if they are clear and unambiguous, and if the challenge is without probable cause. However, there are situations where a challenge may be allowed, such as if the document was procured through fraud or undue influence.
Factors Affecting the Enforceability of No Contest Clauses.
The enforceability of no contest clauses can be affected by a variety of factors. One important consideration is the language used in the clause itself. If the clause is clear and unambiguous, it is more likely to be enforced. Additionally, the circumstances surrounding the challenge can impact enforceability. For example, if the challenge is made without probable cause, the clause may be enforced. However, if the document was procured through fraud or undue influence, the clause may not be enforceable. It’s important to consult with a qualified attorney to understand the specific factors that may impact the enforceability of a no contest clause in your situation.
Examples of Successful and Unsuccessful No Contest Clause Challenges.
The enforceability of no contest clauses can be a complex legal issue, and there have been both successful and unsuccessful challenges to these clauses in various cases.
No Contest Clause Not Enforced (Shumway)
For example in In re Estate of Shumway, 197 Ariz. 57, 3 P.3d 977 (App. 1999), vacated in part, 198 Ariz. 323, 9 P.3d 1062 (2000), the testator’s assistant, Rodriguez, prepared the will and received twenty-five percent of the estate. The will included a penalty clause requiring beneficiaries to forfeit their share of the estate if they challenged the will. Arizona Revised Statutes Section 14-2517 invalidates a penalty clause when there is probable cause to challenge a will. Shumway’s daughters challenged the will on the ground of undue influence.
After a bench trial, the trial court found the will valid and enforced the penalty clause. Division One of the Court affirmed the judgment, concluding:
(1) that the trial court had not abused its discretion in finding Rodriguez had met her burden of proving, by clear and convincing evidence, that she had not exerted undue influence over Shumway, and;
(2) that the contestants had lacked probable cause to challenge the will.
The Arizona Supreme Court reversed the Court of Appeals. It held that though the presumption of undue influence by Rodriguez was eventually overcome, at the time of filing the contest, the daughter challenging the will, as a reasonable person properly informed and advised, had grounds to believe there was a substantial likelihood of success — probable cause to contest the will. The test for whether you have probable cause is as of the time of filing the legal challenge. After full development of the facts at trial, hindsight cannot be utilized to later justify a finding that the contest was unreasonable.
Not Contest Clause Enforced in Shaheen
In In Re the Shaheen Trust, the challengers filed nine separate claims, one of which claimed that the trustee was supposed to make distributions on a different periodic basis than what the trustee was. The challengers claimed that the trustee had engaged in misconduct based on the timing of the trust distributions. The court found there was no basis for that challenge, the trust didn’t require the distributions on the basis that the contestants were claiming.
As a result, one out of nine claims violated the no-contest clause, they did not have probable cause for that claim. Therefore, they were disinherited from any interest in the trust.
The court found that the determination of probable cause must be met on each separate claim that was brought and that the determination of probable cause is based upon the evidence that the attacking party, the challenger or contestant, had at the time that they filed the challenge.
It’s important to understand the specific circumstances of your case and consult with a qualified attorney to determine the likelihood of a successful challenge to a no contest clause.
Strategies for Challenging No Contest Clauses.
Challenging a no contest clause can be a difficult and complex legal process. However, there are some strategies that may increase the likelihood of success. One approach is to argue that the clause is ambiguous or unclear, making it difficult to determine what actions would trigger a challenge. Another strategy is to argue that the clause is against public policy, such as if it would prevent a beneficiary from reporting abuse or neglect. It’s important to work with an experienced attorney who can help you navigate the legal complexities and develop a strong case.
Let Us Help You.
If you want to challenge a will or trust in Arizona, give us a call at 602-443-4888.