March 4, 2015
Authored by: Luke Lantta
The law generally disfavors in terrorem clauses, also known as no contest provisions, because they result in forfeitures. Nevertheless, some people and practitioners like sticking them in governing instruments – sometimes out of habit, sometimes for good reason, and sometimes for not very good reasons at all. Courts in numerous jurisdictions have chipped away at the enforceability of these clauses by, among other things, strictly construing them and creating a probable cause exception. In In re Shaheen Trust, in a matter of first impression, an Arizona appellate court considered what happens when there is a no contest provision and a beneficiary brings a multi-count petition. Must each count be successful or at least have probable cause to survive the in terrorem clause?
According to the Arizona appellate court, yes. When a single petition alleges multiple challenges to a will or trust and those challenges are brought in contravention of a no contest provision, probable cause must exist as to each challenge in order to avoid triggering the clause. Just another reason to avoid overreaching in a trust or will challenge petition.