To Contest or Not to Contest – That is the Question!
A common request we receive when drafting wills and trusts is to put in place what is called an in terrorem or no contest clause. An in terrorem or no contest clause is a provision included in a will or trust that works to disinherit a person who challenges the validity of the document. It is hoped that the fear of losing out completely will create a powerful deterrent to someone who might otherwise bring a challenge your estate plan. While these provisions are now enforceable in most states, the extent to which a court will enforce them is still being contested and each state can be different. In Utah, for example, a no contest clause is not enforceable unless the challenge lacks “probable cause”. Probable cause is also sufficient to escape enforcement of the no contest clause in Idaho and Arizona.
The recent Wyoming case of McDill v. McDill provides an example of the results of such a provision if it is held enforceable. Phyliss McDill’s Trust gave $100,000 to be divided among her children and then divided the balance among her surviving grandchildren. The Trust also included a no contest provision. Following McDill’s death, her son, Thomas, filed a Petition in Texas to invalidate the Third and Fourth Amendments to her Trust. Her other son, Michael, the Trustee of the Trust, sent notice Thomas of his intent to enforce the no contest clause. Michael then filed a Petition in Wyoming to enforce the no contest clause. The action in Texas was ultimately dismissed because of a lack of jurisdiction, meaning it was filed in the wrong court. Thomas argued that because his case was not decided on the merits, it did not violate the no contest clause. The Wyoming court disagreed. Citing the plain language of the no contest provision, the Court determined that the reason for the dismissal were irrelevant.
In planning for your estate, a no contest clause is still a good idea. It can be a powerful disincentive to litigation challenging your plan, but it is not the end of the story as you may hope. Much like non-competition agreements, the strength and reach of the provision will depend on the law of the state where your estate is being administered. But also like a non-competition agreement, the fact that it is there will create a chilling effect that will cause people to at least think twice.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.