Disinheriting a child or family member from one’s estate plan can be one of the most difficult and often heartbreaking issues in estate planning. Simply considering leaving a child out of an estate plan can cause a significant psychological and emotional toll , which many times leads the client to reconsider disinheriting. Leaving the problematic child within the estate plan presents its own issues, however. While many states within the U.S. have laws permitting forfeiture clauses, commonly known as “no contest clauses” or “in terrorem clauses,” which attempt to prevent beneficiaries from causing continued stress or chaos post-mortem, clients need to carefully consider whether they would be better off simply disinheriting child.
In the forms of many estate planning attorneys, “no contest clauses” or “in terrorem clauses” have become standard language. The Latin phrase “In terrorem” translates as “in order to frighten.”1 Historically, in terrorem clauses are intending to “strike terror in the hearts of anyone who might wish to contest a testamentary instrument.”2 In an estate planning context, in terrorem clauses have generally provided beneficiaries “two options: (1) accept the gift under the testamentary instrument, or (2) contest the instrument and, if successful, alter the testator’s dispositive scheme…”; “[i]f the contest fails, the beneficiary would forfeit all benefits under the instrument.”3 A key takeaway that all clients must understand about in terrorem clauses is that they only apply to beneficiaries or devisees under the estate planning instrument. Thus, these forfeiture clauses do not apply to anyone who was not included as a beneficiary or devisee.
Since these forfeiture clauses only apply to beneficiaries or devisees, some believe this should persuade clients to include the problematic family member as a beneficiary. This can offer peace of mind to clients, as they believe these provisions will discourage legal challenges and ensure that the clients’ testamentary intent is followed. Further, by reducing the likelihood of potential disputes, no contest clauses can contribute to a smoother probate process. Presumably, without litigation over contested assets or provisions, this prevents exposure of family conflicts from becoming public record and also enables an efficient administration of the estate or trust, saving time and expenses for both the executor, trustee, and beneficiaries. However, logic and reason needs to apply when including the problematic child as a beneficiary, as doing so can potentially make matters worse.
Many times when the troubled family member is included as a beneficiary, such beneficiary is not going to receive an equal share. Worse, sometimes families will leave the troubled beneficiary a trivial bequest — such as leaving the child $1.00 – in order to have the no contest clause apply. While legally this may be sufficient to have the forfeiture clause apply, the client most likely further upset or angered the family member following their death. Furthermore, the client perhaps did not realize that by making them a beneficiary, the disgruntled family member now has rights as a beneficiary which they would not have obtained if disinherited.
In most states in the U.S., beneficiaries are entitled to a copy of the trust agreement or will, along with an accounting and inventory of all assets and expenses relating to the administration. The trustee or executor in charge of the administration can attempt to redact portions of the estate planning documents that do not pertain to the disgruntled beneficiary. However, if such beneficiary (or their attorney) is unable to deduce what everyone else is receiving from the redacted document, accounting, and inventory, many courts may ultimately force the trustee or executor to provide an unredacted version. Once the upset child or family member is able to obtain sufficient information, the administration can often become an absoulute nightmare, even if the estate plan contained the in terrorem clause. Simply put, the perceivably trivial gift may not be a sufficient deterrent to avoid all of the issues the client was trying to avoid with the in terrorem clause. Under those circumstances, the client would have been better off disinheriting the family member completely and not arming them with all of the information they need to make a dispute more vicious and public.
Certainly, in terrorem clauses are generally a recommended provision in most estate planning instruments. However, when considering whether to include an estranged or badly-behaved family member or to alternatively disinherit, be mindful of the repercussions of both options. A general recommendation is that if you are going to include the problematic family member in your estate plan, make sure their beneficial interest is not too trivial and has the unintended consequences of causing the forfeiture clause to lose its effectiveness.
1 Black’s Law Dictionary 896 (9th ed. 2009).
2 Kara Blanco & Rebecca E. Whitacre, The Carrot and Stick Approach: In Terrorem Clauses in Texas Jurisprudence, 43 Tech. L. Rev. 1127, 1129 (2011). (This article provides a wonderful historical overview of in terrorem clauses, including a biblical account from the Book of Genesis, to the Babylonian Civilization, to the Mesopotamian Civilization, to the Roman Empire, and beyond.)
3 Blanco & Whitacre quoting Gerry W. Beyer, Rob G. Dickinson & Kenneth L. Wake, The Fine Art of Intimidating Disgruntled Beneficiaries With In Terrorem Clauses, 51 SMU L. REv. 225, 227 (1998).
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