I recently published the following article in the Union Leader on the subject of no-contest clauses in estate plans:
Know the Law: What No-Contest Provisions in an Estate Plan Mean for You
Q: My mother’s estate planning documents contain something called “no-contest” provisions. What are these and how do they affect me?
A: No-contest provisions, also referred to as “in terrorem” clauses, are becoming increasingly common in estate plans in New Hampshire. The purpose of these provisions is to discourage litigation by calling for the forfeiture of a legatee’s interests in the will or trust (i.e., disinheritance) if he or she mounts a challenge to the estate plan or, in some instances, its administration.
New Hampshire law recognizes the enforceability of these provisions in both wills and trusts. It requires that the terms of a no-contest provision be honored to the extent possible, subject only to specifically enumerated statutory exceptions, commonly known as “safe harbor” provisions. For example, one such safe harbor provision provides that a no-contest clause will not be enforced to the extent the challenging party is able to prove that a trustee or other fiduciary committed a breach of trust or breach of fiduciary duty.
Before engaging in conduct that could be construed as challenging an estate plan or a fiduciary’s decisions, you should assess both whether the action you plan to take would trigger the applicable no-contest provision, and whether one of the statutory safe harbor provisions may nevertheless offer you protection. Careful attention should be paid to the provision’s language because this language controls what conduct or action is considered a “contest” that would trigger disinheritance. You should also consider first seeking the Court’s guidance as to whether the contemplated action would trigger the applicable in terrorem clause, as such proceedings are entitled to safe harbor protection.
In the event that a triggering contest is unavoidable, you will have to choose between giving up the challenge to protect your beneficial interest in the estate plan or, instead, pursuing the challenge at the risk of disinheritance. When faced with this difficult decision, you should carefully weigh the risk of forfeiture against the likelihood of success and consequent possibility that another safe harbor provision may apply.
Proper navigation of in terrorem clauses and the statutory safe harbor statutes can be complex and the risks can be high. Each case is different and careful thought should be given to whether seeking the Court’s guidance or challenging the estate plan is in your best interest. Before taking action, you should carefully review relevant statutes. It may also be prudent to consult an attorney for further guidance.
