The Common Misconception about the No-Contest Clause

The common misconception about the No-Contest Clause is that it will stop anybody from contesting a Will or Trust.  When in fact, it will only create risk to prospective contestants who are currently benefiting from a Will or Trust.

What is it?  A No-Contest Clause, also referred to as an In Terrorem or Forfeiture clause, is used within a Last Will and Testament and/or a Trust to prevent or stop an intended beneficiary from contesting either of those documents.  However, there is a catch, the no-contest clause is only there to stop a beneficiary, not just anyone excluded from the Will or Trust.  “In theory, a no contest clause creates a conditional gift because the beneficiary’s right to inherit is conditioned upon the beneficiary’s agreement to the terms of the instrument and the inheritance provided.”[1]  Meaning, a no-contest clause puts the prospective contesting beneficiary in the following quandary: If I contest and win, I will receive more benefit from the Will or Trust OR if I contest and lose, I will receive NOTHING.  The underlying importance of the No-Contest Clause is that the person that is contesting the Will or Trust has something to lose, therefore inputting more risk towards their contest.

Why is this important?  Because it will not stop a person from contesting as long as they are not receiving a benefit from the Will or Trust.  The reason for this is due to the conflicting policies with a No-Contest Clause.  “In one hand, enforcing no-contest clauses discourages unmaritous litigation, however, on the other hand, it may inhibit a lawsuit that would prove lack of capacity or undue influence.”[2]

When will the No-Contest not work?  In Arizona, under A.R.S. §14-2517, A [No-Contest Clause] is unenforceable if probable cause exists for that action.[3]  Probable Cause is defined as the …[existence] of evidence that would lead a reasonable person… to conclude that there was a substantial likelihood that the [contest] would be successful.[4]  Therefore, a contestant armed with probable cause can avoid the No-Contest provision.

As a practical matter, a No-contest clause is not bullet-proof to protect a legal document.  It sounds too good to be true and most people assume it is.  However, a good estate planning attorney will be able to navigate your past and family history to help prevent and reduce an opportunity for a contest or lawsuit.

* Always remember to contact an experienced Arizona estate planning attorney if you have any concerns with your estate plan or if you would like advice on the proper administration of an estate.  Williams & Williams Law, LLC is always here to help.  We are available for free consultations.  Come meet the father-son team.

[1] NOT SO FAST: DRAFTING, PLANNING, AND LITIGATING NO CONTEST CLAUSES, SS007 ALI-ABA 497 , 509

[2] Dukeminier, Jesse, Sitkoff, Robert and James Lindgren.  Wills, Trusts and Estates. New York: Aspen Publishers,                 2009.  Print

[3] A.R.S. §14-2517

[4] UPC §2-517 and UPC §3-905