Earlier this week, I blogged on some general tips for how one can simplify the approach to drafting wills in an effort to potentially avoid ambiguity that may lead to litigation.
One of the key suggestions was the proposed inclusion of a “no-contest” clause, also known as an in terrorem clause, which, as you may recall from our previous blog is a clause that a testator can add to their will asserting that if a beneficiary challenges the will, they cannot receive their gift and are effectively disinherited.
At first glance, a “no-contest” clause might seem like the ideal solution for testators whose intention is to deter beneficiaries from challenging their will. However, before incorporating such a clause into your will, it is important to understand its requirements and limitations.
Firstly, “no-contest” clause cannot constitute an “idle threat”: the clause must provide for a gift-over to one or more other non-contesting beneficiaries. It is sufficient to indicate that the gift returns to the residue of the estate, however, this needs to be specified in the clause itself.1
Secondly, “no-contest” clauses cannot limit the beneficiaries’ ability to seek statutory relief. For example, if a beneficiary is entitled to seek dependant support or has other equitable claims against the estate, the “no-contest” clause cannot restrict their ability to pursue such a claim. For a more detailed discussion on this topic, please refer to our previous blog.
Finally, non-contest clauses cannot be contrary to public policy.2 In addition to limiting the contesting beneficiaries’ right to statutory relief, no-contest clauses cannot oust the courts from resolving interpretive issues arising from a will – such an overreach would simply infringe on the courts’ jurisdiction. The same concerns apply to claims by beneficiaries to contesting the appointment of estate trustees in the will. Some U.S. courts have found that permitting a “no-contest” clause to be triggered upon an application to remove an estate trustee would offend public policy, as it could open the floodgates to estate trustees breaching their fiduciary duties with impunity.3
This is not to say that “no-contest” clauses should be dismissed entirely, as they do offer some protection against future litigation and can be combined with other preventative measures to safeguard one’s testamentary wishes. An additional way to reduce the risk of potential litigation is to meet with your family and simply explain the decisions in your estate plan. This could go a long way in ensuring that the beneficiaries do not have to assume what were the intentions of the testator, which can often cause resentment and lead to the commencement of legal proceedings.
Thank you for reading and have a great weekend.