Peace of mind and certainty. Those are the main objectives of most anyone who adopts a will or trust. They simply want to know that whatever they decided will happen to their property upon their death will, in fact, happen. Probate and estate attorneys who are concerned about will contests or challenges often look for added protection. In Terrorem or “no contest” clauses may provide one viable method to discourage groundless will contests and trust challenges.
What is a no contest clause?
In Terrorem is a Latin term meaning “into/about fear.” An In Terrorem or no contest clause is often included in a will or trust in order to scare or discourage a beneficiary from challenging the will or trust in order to receive more than what he/she is designated to receive in the will or trust. Such provisions may be customized to fit the family, situation or expected attack on the will or trust. For example, such a provision could provide that “I leave $100,000 to my son. But, if my son challenges or contests this will to try to get 1/2 my estate under intestate law, I disinherit him and he shall receive nothing.”
Such a clause was at issue in Stewart v. Stewart. There, the no contest clause provided, in part, that if any person took any of the following prohibited actions then they would be deemed to have died before the decedent (person who died and left the will and property), such that the person essentially forfeited all of his/her benefits under the will:
- Contests the validity of the will or trust (such as for lack of testamentary capacity or undue influence);
- Contests any discretionary action taken by the personal representative or by the trustee or the adviser of the trust with respect to certain matters;
- Seeks to obtain an adjudication in any court with respect to my testamentary capacity, capacity to enter into binding contracts, or mental capacity in general at any time; or
- Cooperates or aids in any action described in the preceding provisions of this paragraph with any other person, regardless of whether that other person is himself or herself subject to this article.
One of the Stewart family members was disinherited, so he challenged the will and trust on several grounds in the hope that he would receive a portion of the estate under a prior will or trust or if the person was deemed to have died without a will (intestate). The trial court invalidated the no contest clause as a matter of law, thus allowing the challenge to proceed.
Court of Appeals Confirms No Contest Clauses are Enforceable in Arizona
The Court of Appeals reversed and found that the in terrorem clause in the Stewart will and trust was not automatically invalid as a matter of law. The Court noted that “in terrorem clauses are not prohibited as they “preserve the transferor’s donative intent, avoid waste of the estate in litigation, and avoid use of a will contest to coerce a more favorable settlement to a dissatisfied beneficiary.” But, public policy also allows intervention when a will is adopted when someone has an unsound mind or other improper circumstances.
The Court relied on A.R.S. 14-2517, which provides that “a provision in a will purporting to penalize an interested person for contesting the will or instituting other proceedings relating to the estate is unenforceable if probable cause exists for that action.” In other words, if a person has probable cause to contest a will or challenge a trust, the no contest clause cannot be used to bar him from receiving whatever he would be entitled to receive under the will if the challenge fails. In other words, notwithstanding a no contest clause, a person is not disinherited as long as there was probable cause for the challenge or will contest.
What is probable cause?
From the cases, it appears to be a higher standard than you would think. The Arizona court has defined “probable cause” as “the existence, at the time of the initiation of the proceeding, of evidence which would lead a reasonable person, properly informed and advised, to conclude that there is a substantial likelihood that the contest or attack will be successful.” Basically, as long as an objective reasonable person who has the important evidence and law would conclude that there is a substantial likelihood that the will or trust was procured by improper means, the person cannot be disinherited, even if the challenge fails.
What about those who cooperate in a contest?
So, what about those other beneficiaries who do not actually pursue a challenge, but assist or cooperate with the beneficiary to do so? The Stewart Court addressed that issue too. So long as the other beneficiaries do not voluntarily assist or cooperate in pursuing a will challenge without probable cause, they cannot be disinherited. For example, if the other beneficiary is subpoenaed to turn over records or testify at a deposition, he would not lose his rights even if the contest was frivolous.
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If you or a family member has any questions or need any assistance in a will, trust, probate or estate dispute in Arizona, we are here to help. Just give us a call or email our Arizona estate and probate attorneys.