By: Justin M. Smigelsky, Esq.
Although a testator or testatrix will usually seek to prevent anyone from contesting his or her Last Will and Testament, attacking terms of the Will, or making a claim against the estate or fiduciary, there is generally no full-proof way of doing so under New Jersey law. In some instances, the testator or testatrix may decide to include a clause – known as an “in terrorem,” “no contest,” “anti-contest,” or “forfeiture” clause – in his or her Will which provides for the revocation of a bequest or the imposition of costs if the beneficiary challenges the Will or otherwise causes litigation. As the fear of losing one’s distribution from an estate would appear to provide a powerful incentive against instituting litigation in regards to the estate, it would seem that an in terrorem clause would be a wise choice in any estate plan. Pursuant to the New Jersey Probate Code, however, “a provision in a will purporting to penalize any interested person from contesting the will, or instituting other proceedings relating to the estate, is unenforceable if probable cause exists for instituting proceedings.”
The theory behind the statute is that a person exerting undue influence over a testator or testatrix could insert such a clause into the Will and, therefore, impose forfeiture upon any one who attempts to contest the probate of the Will. Although there have been very few New Jersey decisions to address the use of the in terrorem/no-contest clause, these clauses are still enforceable if probable cause does not exist to challenge the Will or its terms – the common misperception, however, is that such clauses are never enforceable. Additionally, as the use of trust instruments is becoming more common in estate planning, but the word “trust” does not appear in the statute, how would an in terrorem clause be construed in the event of a dispute over the terms or administration of a trust? Pursuant to case law, it appears that such a clause will similarly be unenforceable where probable cause exists to institute the challenge.
Due to the highly emotional nature of family dynamics at the time of a loved one’s death, very little is needed to spark protracted litigation from hurt feelings or minor disappointment. Therefore, the estate planning attorney should consider how, when, and why an in terrorem clause may be used to discourage disputes. Although such clauses are often viewed as being “more bark than bite,” (see In Terrorem Clauses: Avoiding Will Contests and Disinheritance, by Jack Challis), they may still provide disincentive for the contesting beneficiary.
Because estate and trust administration and litigation requires specialized knowledge, you may wish to consult with an experienced attorney if you are either a fiduciary or beneficiary of an estate or trust. Specifically, you may wish to contact an attorney if you have questions regarding your estate planning, the probate process, administration of an estate or trust, fiduciary obligations, preparation of a formal or informal accounting, refunding bonds and releases, and the procedures for filing a formal accounting or exceptions thereto. This article is for information purposes only, and is neither legal advice nor the creation of an attorney client relationship.
Justin M. Smigelsky, Esq. / Timothy J. Little, P.C. – 2016 – All Rights Reserved