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.

We are here to help

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.

http://www.youtube.com/watch?v=4X7jbI9M3uY

http://www.youtube.com/watch?v=4S595Md1Ll8

The buyer hired a contractor to do some renovations. The contractor demolished a wall and found $500,000 of cash and valuables hidden inside. The buyer, seller and contractor each claimed the property.

The Court analyzed the three types of lost property, mislaid, abandoned and treasure trove.   The Court also considered the intent of the buyer and seller in the sale.  Who do you think owns the $500,000.  Watch the video to find out more.  You can also read the Court’s decision, Grande v. Jennings.

GAO identified hundreds of allegations of physical abuse, neglect and financial exploitation by guardians in 45 states and the District of Columbia between 1990 and 2010. In 20 selected closed cases, GAO found that guardians stole or otherwise improperly obtained $5.4 million in assets from 158 incapacitated victims, many of whom were seniors. In some instances, guardians also physically neglected and abused their victims.

Fortunately, Arizona law has protections for vulnerable and incapacitated adults that suffer from financial exploitation (theft), abuse or neglect.  Arizona’s Adult Protection Act provides for civil and criminal penalties, including disinheritance of and double damages  against the wrongdoer.

If you or a loved one is a victim of abuse, neglect or financial exploitation, we can help.  Our experienced Arizona probate attorneys provide aggressive and compassionate representation in virtually all types of elder abuse cases.  Please contact us if you have any questions.

Under community property law, each spouse owns one-half of all community property.  Community property is generally any property earned or received during marriage, except through a gift from someone else or from someone else’s estatte.

So, is the surviving spouse entitled to one-half the total value of community property upon the death of her husband or one-half the value of each community asset?  In this probate case, the Court answered that question, summarized by Arizona probate lawyer Kent Berk in this video.  You can also read the Court of Appeals’ decision, In Re Estate of Fred Kirkes.

Is a will that refers to a list still valid, even if the list is actually not attached?  In other words, is an incomplete last will and testament still valid under Arizona probate law?

In this video, Kent Berk, Scottsdale, Arizona probate and estate lawyer, answers these and other questions, and summarizes the Court’s findings in Re: Estate of Gloria Waterloo,  Zimmerman v. Allen.

In summary, as long as the document reflects that the person intended to make a will, it is valid and will be enforced to the extent possible, even if the will is incomplete or refers to a non-existent list.

Read the entire case, In Re: Estate of Waterloo, Zimmerman v. Allen, Arizona Court of Appeals, Div. 1, March 8, 2011

Berk & Moskowitz, P.C. – Attorneys – Conference Room

James Blackford signed a last will and testament in 2003 leaving everything to his son.  In 2004, a guardian was appointed to care for Blackford.  By 2008, that guardian’s health had declined so he could no longer care for Blackford.  So, on May 28, 2008, the court held a hearing to determine whether Blackford could care for himself or a replacement guardian should be appointed.

At the May 28, 2008 hearing, Blackford claimed that he was healthy enough to care for himself and that he was self-sufficient.  His son argued that his father was not self-sufficient and that a guardian was necessary to care for Blackford.  The probate court found that Blackford “’remains impaired by a mental disorder to the extent that he lacks sufficient understanding or capacity to make responsible decisions regarding his person.”  The court also concluded that he was “an incapacitated person pursuant to A.R.S. Section 14-5101(1).”  Based on those findings, the court appointed a new guardian to care for Blackford.

On the same day that the Arizona probate court held the guardianship hearing, Blackkford adopted a new last will and testament.   In that will, he left everything to his grandson, thus disinheriting his son and undoing his 2003 will.

Not surprisingly, after Blackford died, his son challenged the 2008 will.  He claimed that the court found that Blackford was incapacitated and needed a guardian on the same day.  As a result, the son claimed that the 2008 will was invalid.  After various court proceedings, the personal representative filed a motion for summary judgment to uphold the 2008 will.  Because the son did not respond to the motion, the court granted the motion and validated the 2008 will.

The son then appealed that ruling.  He argued that there was evidence in the court’s file (the findings regarding Blackford’s need for a guardian) based on which the probate court should have found that Blackford could not have adopted a valid will on May 28, 2008.  The court of appeals found that the trial court should not have granted summary judgment.  The trial court should not have summarily validated the 2008 will.  The trial court had evidence in its file showing Blackford’s need for a guardian.  That, the court of appeals found, was enough evidence to create an issue of fact requiring a trial as to whether Blackford had testamentary capacity.   Even though the son did not respond to the motion for summary judgment, the trial court still should not have granted judgment upholding the 2008 will.

“We do not decide that the guardianship proceedings conclusively determined the issue of [Blackford's] testamentary capacity. As the court stated in In re Thomas’ Estate, 105 Ariz. 186, 189, 461 P.2d 484, 487 (1969), “[a]n adjudication of incompetency under the guardianship statute does not of necessity indicate a lack of mental capacity to execute a will.”

In other words, a person who needs a guardian may or may not still have testamentary capacity under probate law.  But, if a guardian is appointed it is a strong enough suggestion of lack of capacity so as to prevent the court from summarily finding that the person did have testamentary capacity.  Thus, the court of appeals sent the case back to the trial court for a trial regarding whether Blackford had testamentary capacity.

The son was successful on his appeal without having filed a response to the motion for summary judgment.  That does not mean it is okay to not respond to motions.

In 2011, Arizona law was amended to allow a vehicle owner to designate a beneficiary to receive ownership of the vehicle upon the person’s death.  A.R.S. § 28-2055(B) now provides that  ”at the request of the owner [of a motor vehicle] and on payment of a fee prescribed by the department by rule, the certificate of title may contain, by attachment, a transfer on death provision where the owner may designate a beneficiary of the title.”

The Arizona Department of Transportation Motor Vehicle Division even provides a simple one-page form to designate a beneficiary, called a Beneficiary Designation for Vehicle Title Transfer Upon Death.

You may wonder whether a ward who has a guardian may still drive.  Fortunately, Arizona law has answered that question.  Pursuant to A.R.S. § 14-5304.01, a guardianship does not automatically terminate the ward’s driver license or prevent the ward from obtaining a driver license in Arizona.  Rather, upon appointment of a guardian, “the court may determine that the ward’s privilege to obtain or retain a driver license should be suspended and issue an order suspending the privilege.”  ”If the court is presented with sufficient medical or other evidence to establish that the ward’s incapacity does not prevent the ward from safely operating a motor vehicle, it may decline to suspend the ward’s privilege to obtain or retain a driver license and issue an order allowing the ward to obtain or retain a driver license.”