Beneficiaries beware!  The Arizona Court of Appeals has concluded that someone who challenges a trust may be disinherited for violating a “no-contest” clause.

A no-contest or forfeiture clause is a provision included in a will or trust to discourage litigation and disputes.  Such provisions have obvious benefits of avoiding litigation and allowing the prompt distribution of trust or estate assets.

But, there are conflicting public policies when it comes to enforcing such clauses.  Courts have a strong public policy of enforcing the maker’s intent, including his direction to disinherit someone who challenges the document.  Such challenges sometimes waste time and money.  A contestant may also use such a challenge to coerce a more favorable disposition in settlement from other beneficiaries than what the maker intended.

On the other hand, forfeiture is generally disfavored.  And public policy typically ensures access to the courts to pursue legitimate challenges.  Such challenges may include, among other things, that the maker lacked mental capacity, was unduly influenced or defrauded into making the will or trust.  In those cases, the document does not reflect the maker’s true intent.  If a challenge were not permitted, it would allow the enforcement of a document that does not genuinely set forth the person’s true intent for the disposition of his assets. [Read more…]