No Contest Clauses

A Testator cannot be allowed to hamper so fundamentally such a vital right to seek redress for grievances through due process of law.

In order to reduce the possibility of expensive and fractious litigation, many wills and trusts include “in terrorem” clauses. Such clauses provide that anyone who contests the will or trust is disinherited, and they are intended to terrorize or frighten heirs who may be inclined to institute a will or trust contest. An in terrorem clause may provide, for example:

“If any beneficiary hereunder (including, but not limited to, any beneficiary of a trust created herein) shall contest the probate or validity of this Will or any provision thereof, or shall institute or join in (except as a party defendant) any proceeding to contest the validity of this Will or to prevent any provision thereof from being carried out in accordance with its terms (regardless of whether or not such proceedings are instituted in good faith and with probable cause), then all benefits provided for such beneficiary are revoked and such benefits shall pass to the residuary beneficiaries of this Will.”

A few states, like California and New York, enforce no contest clauses without limitation. Other states, such as Florida, do not enforce no contest clauses. In recent years, we have seen more and more states follow the approach of the Uniform Probate Code, which carves out a good faith and probable cause exception to in terrorem clauses. Under this exception, if someone brings a will or trust contest in good faith and with probable cause, the in terrorem clause will not be enforced and the individual who instituted the contest will not be disinherited.

THE GOOD FAITH AND PROBABLE CAUSE EXCEPTION:

In Parker v. Benoist, 160 So.3d 198 (Miss. 2015), Mississippi joins the shift towards recognizing a good faith and probable cause exception to the enforcement of in terrorem clauses. In 1998, B. D. Benoist executed a Will which, after providing for the lifetime needs of his spouse, left all of his property in equal shares to his two children, William and Bronwyn. Shortly before he passed away, B. D. conveyed most of his real estate to William, and B. D. executed a new Will which left a significantly larger share of B. D.’s estate to William. The 2010 Will contained the in terrorem clause quoted in the italicized language above.

After B. D. passed away, William admitted the 2010 Will to probate and shortly thereafter Bronwyn filed a will contest which alleged that William exercised undue influence over their father. Specifically, Bronwyn alleged that William convinced B. D., who suffered from significant dementia, to give William most of his real property and to change his Will in a manner which would leave William a significantly larger share of B. D.’s estate.

At trial, the jury returned a verdict that, although there was evidence of a confidential relationship between William and B. D., there was no evidence that William exercised undue influence over B. D. Applying the in terrorem clause in the Will, the Chancellor then ordered that Bronwyn would receive nothing under the Will and ordered her to pay all attorney fees and court costs associated with the Will contest.

Bronwyn appealed and in a case of first impression in Mississippi, the Mississippi Supreme Court reversed the Chancellor’s order which enforced the in terrorem clause. In particularly strong language, the Court held that “[an in terrorem] provision is unconstitutional under Mississippi’s Constitution, void as against public policy, and fundamentally inequitable, and we join the large number of jurisdictions who permit a good faith and probable cause exception to [in terrorem] clauses in wills.” There does seem to be some dissonance in the Court’s opinion, however, over the enforceability of an in terrorem clause: while the Court held that an in terrorem provision is “unconstitutional” and “void against public policy,” in another part of the Court’s opinion, it held that “in Mississippi, in terrorem provisions in wills are enforceable unless a contest is brought in good faith and based on probable cause.” Despite the strong language that in terrorem clauses are unconstitutional and void, it appears that the Court recognizes the validity and enforceability of in terrorem clauses but recognizes a good faith and probable cause exception.

In its opinion, the Court reasoned that “the logic for a good faith exception is simple: courts exist to determine the truth. . . .” “A good faith and probable cause exception to the enforceability of forfeiture clauses in wills is in keeping with the guaranty of all citizens of this state to seek redress for their grievances through due process of law.” “A Testator cannot be allowed to hamper so fundamentally such a vital right to seek redress for grievances through due process of law.”

PARTING THOUGHTS

It is clear that there is a shift in the states, as we’ve seen in Mississippi, towards carving out a good faith and probable cause exception to in terrorem clauses. The act of filing a will or trust contest will not necessarily mean that the heirs who file suit will effectively be disinherited and take nothing. This shift should certainly increase the number of will and trust contests since the disincentive in in terrorem clauses has been muted. It will be interesting to see how courts interpret and apply the good faith and probable cause standards.

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Matters of Trust is devoted to timely and relevant insight and commentary on trust administration and litigation. My hope is that whether you are a beneficiary of a trust, a trustee, a CPA or investment manager who works with trust clients, or someone simply interested in how trusts are administered well (or poorly), you’ll find content that relates and matters to you.

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