Anyone who adopts a trust or a will does so to make certain what will happen to his assets when he dies. By adopting a trust and/or a will, the person wants to avoid any misunderstanding or family fight over who gets what. And they want to avoid the acrimony and expense that often results from probate or trust litigation. When someone contests a trust or a will, whether based upon lack of testamentary capacity, undue influence or some other basis, the very certainty sought by having a will or trust in the first place may be lost. The trust or estate may then be put to substantial expense to resolve the dispute. The distribution of assets may also be delayed.
Not surprisingly, people put provisions in their estate planning documents to discourage will and trust contests and challenges. Such a clause is typically called a “no-contest” clause. They are also referred to as “in terrorem” (from the Latin term “in fear”), noncontest, anticontest or forfeiture clause. Basically, the provision is designed to threaten the would-be challenger and put him in fear of getting nothing if he files a challenge to the document.
A typical no-contest clause provides something like the following: “I hereby leave $1 million to Johnny, but if Johnny directly or indirectly challenges or contests all or any part of my will or trust, he is disinherited and gets nothing.”
Compare this example with an extreme no-contest clause included in the Will of Wolgith dating back to the year 1046:
He that bereaves my will, which by God’s permission I have now made, let him
be bereaved of these earthly joys; and may the Almighty Lord — cut him off
from all holy men’s communion in Doomsday; and be he delivered to Satan, the
Devil and all his cursed companions to hell’s bottom, and there be tortured, with
those whom God has cast off or forsaken, without intermission, and never
trouble my heirs.*
*Will of Wolgith, A.D. 1046, translation from Charles Watkins, Esq., The Law of Tenures, Including the Theory and Practice of Copyholds (1796). Fortunately, today, forfeiture clauses typically do not include threats of eternal damnation and torture.
Such clauses may be customized to fit particular situations. It is important to consult with experienced estate planning counsel to discuss whether a forfeiture clause makes sense for you and, if so, the scope of the clause.
Public Policy for and Against No-Contest Clauses
Determining whether a no-contest clause should apply involves balancing competing public policies. On the one hand, public policy supports enforcing penalty clauses from the standpoint of preserving the true intent of the will or trust maker, avoiding wasteful and time-consuming litigation and preventing a dissatisfied beneficiary from coercing a more favorable settlement than what was truly intended. Indeed, the primary objective of estate and trust law is to ascertain and give full force to the maker’s intent.
On the other hand, the policies and objectives supporting enforcement of no-contest clauses must be balanced against the policy of disfavoring forfeitures and allowing access to the courts to challenge a transfer that is truly invalid because, for example, the person lacked mental capacity or was unduly influenced, the document was procured by fraud, was forged or is otherwise invalid. In other words, the courts do not want to have a rule of law that wills and trusts are blindly enforced, even where they may otherwise be set aside. Doing so would violate the paramount goal of ascertaining and enforcing the person’s true intent.
The Probable Cause Requirement
In order to reconcile the competing reasons to enforce or disregard forfeiture clauses, such clauses are enforced and the challenger is disinherited or penalized only if the challenger’s claim lacked “probable cause.” ARS § 14-2517 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.” That section applies only to wills. There is no statute dealing with penalty clauses in trusts. But, because trusts are viewed as will substitutes, the probable cause requirement on penalty clauses in wills also applies to trusts. So, if a challenge to a will or trust had probable cause, the challenger will not be disinherited, even if he loses the challenge.
So what is probable cause? The Arizona Supreme 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. The evidence needed … should be less where there is strong public policy supporting the legal ground of the contest or attack …. A factor which bears on the existence of probable cause is that the beneficiary relied upon the advice of disinterested counsel sought in good faith after a full disclosure of the facts.
To have probable cause, the challenger must have objective evidence based upon which to conclude that there was a substantial likelihood of winning the challenge. And the challenger must have the evidence at the time that the contest is filed. In other words, later discovered evidence will typically not support a finding of probable cause. The challenger must also have a subjective actual good faith belief that the contest will likely succeed as of the time that the claim is initiated.
The court will determine whether probable cause existed, as of the time that the challenge was filed, separately with respect to each claim. So, if the challenger attacks the will or trust on multiple separate grounds, the court must determine whether each and every separate claim had probable cause. If even one claim lacked probable cause, the no-contest clause will apply and the challenger will lose whatever benefits that he otherwise may have been entitled to receive.
Consult Experienced Estate and Trust Counsel
Pursuing or defending against a will or trust contest is a complicated process, involving competing issues and claims. Such litigation can become even more complicated when a no-contest clause is at issue. The Arizona Supreme Court has directed that “one important factor used to determine whether the will contest was filed with probable cause is that the beneficiaries relied on the advice of disinterested counsel, sought in good faith after a full disclosure of the facts.”
If you are contemplating challenging a will or a trust that includes a no-contest clause, it is particularly important to consult with an experienced probate or trust attorney. Knowledgeable counsel can assist you in evaluating available claims, the evidence supporting each, whether the forfeiture clause applies to the challenge and whether you have probable cause for the contest.
Similarly, defending against a challenge should include evaluating whether to invoke any available forfeiture clause and, if so, when to do so.
The Arizona probate and trust attorneys at Berk Law Group, PC are here to help. If you have any questions, please let us know.