ARTICLE:
Litigating a ‘No-Contest’ Clause
By Adam T. Gusdorff
As if cost and a demanding burden of proof were not significant enough deterrents to bringing a will (or trust) contest, disappointed beneficiaries frequently are confronted with another disincentive: a no-contest clause. In general, a no-contest clause (sometimes called a forfeiture or in terrorem clause) provides that any person who contests the will forfeits his testamentary share in its entirety or instead will receive a nominal amount. Sometimes the clause provides that the contesting party’s issue also will be disinherited, while other times forfeiture can result merely from a challenge to an administrative provision of the will.
Regardless of the specific wording, the contestant is confronted with potentially having to clear two hurdles: the underlying document and, if the contest is unsuccessful, the forfeiture clause. It is, therefore, critical for counsel to understand how and when such a clause might apply and to advise the client accordingly. By taking appropriate steps during the early stages of the representation, counsel also can avoid having the forfeiture clause enforced against his client even if he loses the contest.
Introduction
A no-contest clause essentially makes all gifts under the will or trust conditional, in that a gift is not effective unless the condition is satisfied, i.e., the beneficiary of the gift does not challenge the document or otherwise take a prohibited action. No-contest clauses, if invoked, operate to divest a beneficiary of an otherwise vested interest upon the occurrence of a future event, e.g., an unsuccessful challenge of the validity of a will or a provision thereof. In that regard, the types of clauses that are the focus of this article are similar to bequests that are revoked if the beneficiary engages (or fails to engage) in certain conduct or if the
property given is used (or not used) in a specified manner.
The validity of such provisions turns on whether the condition violates the law or public policy, whereas the applicability of a valid forfeiture clause depends on whether the conduct of the beneficiary violates the specific provision. If the conduct does not fall within the scope of that which is proscribed, then the clause will not apply, and its enforcement will not be considered. The implicit rationale is that, had the testator intended forfeiture based on the conduct at issue, he would have drafted his will to accomplish that result.
Thus, confronted with a will or trust containing a no-contest clause, the unhappy or suspicious beneficiary is faced with a choice between (1) accepting the gift provided under the will or trust, or (2) contesting the document with the hope of invalidating the stated disposition to receive a greater share under another document (or via intestacy), but with the contemporaneous risk that an unsuccessful contest could result in his forfeiting all benefits. If the beneficiary is successful in contesting the will or trust, the no-contest clause will fall with the invalid document. Conversely, if he is unsuccessful and the no-contest clause is enforced, he could receive nothing (or whatever nominal gift might be substituted as a penalty).
To strike a middle ground in an otherwise all-or-nothing situation, Pennsylvania courts will not enforce a forfeiture clause if the contestant had probable cause to bring the action. This long-standing principle was codified in 1994 (effective in 1995) as Section 2521 of the Probate, Estates and Fiduciaries Code:
A provision in a will or trust purporting to penalize an interested person for contesting the will or trust or instituting other proceedings relating to the estate or trust
is unenforceable if probable cause exists for instituting proceedings.
20 Pa. C.S. § 2521 (“Section 2521”). The law balances the public policies of respecting a testator’s intent and discouraging baseless litigation against the right of a beneficiary to ensure that the testator’s true wishes are being honored. Accordingly, it is critical for a potential contestant – and his counsel – to consider, before the initial court filing, the consequences of an unsuccessful action and the facts he possesses that later could be used to demonstrate probable cause. Conversely, it is important for counsel for the will proponent to “lock in” the contestant’s basis for bringing the action as soon as possible once the litigation begins.
Development of Pennsylvania’s Probable Cause Exception
It is unquestioned that a testator has the “absolute power” to dispose of his property as he wishes, which includes the imposition of a condition of forfeiture upon his beneficiaries if any contests the will or provisions thereof. Friend’s Estate, 58 A. 853, 854 (Pa. 1904); see also In re Hickman’s Estate, 162 A. 168, 169 (Pa. 1932) (stating that a condition of forfeiture may be imposed unless the condition violates the law or public policy). However, because courts are hesitant to enforce forfeiture clauses, they will be enforced only in clear cases, and not in doubtful ones. See McCrea Estate, 10 Fiduc. Rep. 459, 461, 21 Pa. D. & C.2d 305, 307 (O.C. Phila. 1960).
No-contest clauses are narrowly construed because they operate to divest interests that already have vested. See Chew’s Appeal, 45 Pa. 228, 232 (1863); see also McBrearty Estate, 26 Fiduc. Rep. 2d 247, 253 (O.C. Chester 2006); Volchok Estate (No. 2), 25 Fiduc. (Continued on Page 9)
Rep. 2d 113 (O.C. Montg. 2005), aff’d, 903 A.2d 56 (Pa. Super. 2006). Accordingly, a reasonable construction will be given in favor of the beneficiary and a strict construction against a forfeiture. See In re Davis’ Estate, 118 A. 645, 646 (Pa. 1922). However, when interpreting a no-contest clause, the court’s “primary concern” always should be “doing justice to the intent of the testatrix.” In re Estate of Simpson, 595 A.2d 94, 100 (Pa. Super. 1991); see also Mitchell’s Estate, 20 Pa. D. & C. 101, 103 (O.C. Phila. 1933) (stating: “A forfeiture clause is strictly construed. When enforced, it will always be in aid of expressed testamentary intention and not contrary thereto.”).
Despite the importance of carrying out a testator’s intent, an otherwise valid forfeiture clause will not be enforced if the unsuccessful contestant had probable cause to initiate the proceedings. See 20 Pa. C.S. § 2521. Section 2521 follows Section 2-517 of the Uniform Probate Code and is consistent with all three Restatements of Property. See Restatement (thiRd) of PRoPeRty, donative tRansfeRs
§ 8.5 (2003); Restatement (second) of
PRoPeRty, donative tRansfeRs § 9.1
(1983); Restatementof PRoPeRty §§
428-429 (1936).
The Joint State Government Committee comment to Section 2521 states that the statute codifies existing state law, which is a reference to a line of Pennsylvania cases that dates back more than a century. See, e.g., Friend, 58 A. 853; Chew, 45 Pa. 228. The probable cause exception, which was first discussed at length in Friend, developed in Pennsylvania as a way to protect both the intent of the testator and the rights of the contesting beneficiary.
In Friend, the Pennsylvania Supreme Court affirmed the trial court’s decision to not enforce a no-contest clause against an unsuccessful will contestant. The court observed that although other courts enforced no-contest clauses without exception, it believed the better rule was to not
impose forfeiture “when it clearly appears that the contest … was justified under the circumstances, and was not the mere vexatious act of a disappointed child or next of kin.” 58 A. at 854. The court supported its decision by stating that an inflexible rule mandating enforcement of such clauses whenever an unsuccessful contest was raised not only could result in a manifest injustice to the contestant, “but accomplish results that no rational testator would ever contemplate.” Id.
The court explained its rationale by presenting the example of a person who unduly influences a testator to execute a will that not only favors him but also includes a no-contest clause. It reasoned that an exception to unbending enforcement of such clauses is warranted because, without one,
those who unscrupulously play upon the feelings of the testator may, with impunity, enjoy the fruits of their iniquity and laugh in scorn at those whom they have wronged. If the condition of forfeiture is to be enforced in every case, those who improperly influence a testator may boast to a child, against whom he has discriminated, of the power they exerted over him and of what they were able to accomplish for themselves, taunting and goading on such a child to a contest; and yet if, in the end, those who so invited it, and whose conduct made it justifiable, succeed in sustaining the will by retracting or denying what they said, the contestant will not only be deprived of his gift or devise, but those who drew him into the contest may acquire his portion as part of their own plunder.
Id. The court concluded its discussion by holding that forfeiture should not be imposed where it is clear that there was “probabilis causa litigandi,” but where “it is not clear, or if it is doubtful
whether there was probable cause, the will of the testator should be regarded as supreme, and his direction to forfeit carried out.” Id. at 855.
The court ultimately determined that probable cause existed because the contestant, based on the information he possessed, was justified in questioning the validity of the decedent’s will. In doing so, it acknowledged the trial court’s statement that the circumstances were such “ ‘to put any prudent man on inquiry as to the causes which led to the making of such will.’ ” Id. at 857.
The probable cause exception was acknowledged in several other cases prior to the enactment of Section 2521. See, e.g., Estate of Keller, 629 A.2d 1040 (Pa. Super. 1993); Simpson, 595 A.2d 94; Vanderkraats Estate (No. 3), 14 Fiduc. Rep. 2d 166 (O.C. Chester 1994); McMillin Will, 8 Fiduc. Rep. 315 (O.C. Lawr. 1958); Lewis’s Estate, 19 Pa. D. 432, 1910 WL 3789 (O.C. Phila. 1910).
Section 2521 was enacted on Dec. 1, 1994, as part of an act that made numerous additions and amendments to the Probate, Estates and Fiduciaries Code, and it became effective 60 days later. See 1994 P.L. 655, Act No. 1994-102, Sec. 2. Section 2521 applies to wills executed and trusts created before, on or after the effective date of the act. See id. at Sec. 10(3).
Does the No-contest Clause Apply?
Of course, before deciding whether to enforce a no-contest clause, a court must first determine whether it even applies to the situation at issue. To do that, the court necessarily must examine the language of the clause itself and, where relevant, of the entire will or trust.
In cases involving forfeiture in the event a beneficiary contests the validity of a will, it is clear whether the clause applies because it is apparent that the beneficiary brought and unsuccessfully prosecuted a will contest. See, e.g., Friend, 58 A. 853; Simpson, 595 A.2d 94; Vanderkraats (No. 3), 14 Fiduc. Rep. 2d 166; McMillin, 8 Fiduc. Rep. 315. However, a forfeiture clause will not be enforced where the beneficiary
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Litigating a ‘No-Contest’ Clause
merely filed a caveat with the register of wills but ultimately did not pursue a will contest. See In re McCahan’s Estate, 70 Pa. 711 (Pa. 1908). Moreover, a court might be willing, under the circumstances, to determine that a no-contest clause is inapplicable while the parties to a will contest are engaging in settlement discussions and before a hearing on the merits has been held. See Worley Will, 4 Fiduc. Rep. 2d 319 (O.C. Adams 1984).
When appropriate, courts will resolve the question by concluding that the beneficiary’s conduct is not within the scope of the no-contest clause. Courts have long made the distinction between actions that seek to invalidate the will or provisions thereof and actions that seek to enforce rights under the will. For example, where the petitioning party is seeking an interpretation of the will, a forfeiture clause will not apply because the beneficiary is attempting to ascertain and carry out the testator’s intent. See, e.g., In re Ervin’s Estate, 79 A.2d 264 (Pa. 1951); McBrearty, 26 Fiduc. Rep. 2d 247; Kelly’s Estate, 27 Pa. D. 349, 1918 WL 3528 (O.C. Phila. 1918); Lewis, 19 Pa. D. 432, 1910 WL 3789. This is so even if the beneficiary’s proposed interpretation would result in a partial intestacy, see Emrick Estate, 20 Fiduc. Rep. 2d 390 (O.C. Northam. 1999), or if the suggested interpretation is not adopted by the court, see, e.g., Ervin, supra.
Similarly, where a beneficiary claims that a decedent’s assets pass under her will and not an inter vivos trust, that beneficiary is seeking to enforce the will, rendering the clause inapplicable to him. See Izzard Estates, 29 Fiduc. Rep. 2d 66 (O.C. Phila. 2007), aff’d, 965 A.2d 308 (Pa. Super. 2008). Conversely, the forfeiture clause might apply to the beneficiary who claimed that all assets passed pursuant to the trust. See id. (In this latter case, query whether the beneficiary was contesting the validity of the will or merely asserting that there were no probate
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Litigating a ‘No-Contest’ Clause
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assets passing thereunder. Cf. Emrick, 20 Fiduc. Rep. 2d 390.)
Where a beneficiary files objections to a fiduciary’s administration, that generally will not be deemed an attack on the validity of the will. In Mitchell, supra, the guardian and trustee ad litem pre-emptively asked the court whether the minor and unborn beneficiaries’ interests would be forfeited if he raised questions regarding the estate’s administration. In holding that no forfeiture would result, the court reasoned as follows:
It is one thing to attempt to circumvent testamentary provisions, and quite another to seek to enforce their legal execution. If excessive counsel fees, commissions, or other charges are sought, of if the executors have unlawfully incurred losses in selling or retaining securities, or (merely for argument) suppose the executors were guilty of actual devastavit, the parties in interest must necessarily be afforded the opportunity of seeking relief. Such effort
is not against testamentary directions, but in furtherance thereof.
20 Pa. D. & C. at 103 (emphasis added). Since Mitchell, courts generally have found no-contest clauses to be inapplicable where beneficiaries raised legitimate concerns about a fiduciary’s administration. See Lewis Estate, 20 Fiduc. Rep. 2d 249 (O.C. Phila. 2000), aff’d, 776 A.2d 298 (Pa. Super. 2001); Sands Estate, 66 Pa. D. & C. 551 (O.C. Montg. 1948); see also Killian Estate, 9 Fiduc. Rep. 2d 257 (O.C. Berks 1989) (holding that a beneficiary’s petition to compel the executor to sell estate property to him was not an attempt to controvert the will). However, where the contestants unreasonably question the administration in such a way that would frustrate the testator’s intent embodied in administrative provisions, a clause declaring forfeiture for attacks on any provision of the will or trust will apply. See Volchok, 25 Fiduc. Rep.
2d 113.
Finally, it bears noting that where a no-contest clause is ambiguous about who will receive a forfeited interest, a court might resort to the statutory rules of construction. In the case of a non-residuary gift, it should be treated as having been revoked by the testator within the meaning of 20 Pa. C.S. § 2514(10), such that the forfeited interest will pass to the residuary beneficiaries. See Vanderkraats Estate, 27 Fiduc. Rep. 2d 328 (O.C. Chester 2007), aff’d, 972 A.2d 568 (Pa. Super. 2009). This decision by the Chester County Orphans’ Court reversed the court’s earlier ruling that forfeiture should be equated with predeceasing the testator for purposes of applying the anti-lapse provision of 20 Pa. C.S. § 2514(9). See Vanderkraats Estate, 24 Fiduc. Rep. 2d 3 (O.C. Chester 2003), rev’d and remanded, 864 A.2d 588 (Pa. Super. 2004); see also 20 Pa. C.S. § 2514(11) (relating to lapsed and void residuary shares).
Evaluating the Existence of Probable Cause
Once it is decided that a no-contest clause applies in a particular case, the court must then consider whether to enforce it by determining whether the unsuccessful contestant had probable cause to institute the proceedings. In many cases, this occurs in a separate proceeding after the underlying action has concluded. How a court should define “probable cause” with respect to the application of a no-contest clause has not been settled, but several cases provide insight.
In establishing the exception, the Supreme Court, while not specifically defining “probabilis causa litigandi,” stated that the exception applied if the contest “was justified under the circumstances, and was not the mere vexatious act of a disappointed child or next of kin.” Friend, 58 A. at 854. The court framed the question as whether the contestant “under the information which he possessed, and in view of what he had to prove in the first instance, was justified in questioning the validity of his mother’s will.” Id.
at 856. It further acknowledged that probable cause could exist despite an unsuccessful contest. See id. (stating “If the question is to be determined in view of the findings and conclusions reached after the full hearing of both sides on the petition for an issue, it may well be contended that probable cause did not exist; but that is not the test.”).
In McMillin, supra, the court adopted the following definition of probable cause, as set forth by the Supreme Court in a malicious prosecution case: “ ‘a reasonable ground of suspicion supported by circumstances sufficient to warrant an ordinary prudent man … in believing that the party is guilty of the offense.’ ” 8 Fiduc. Rep. at 321-22 (quoting Miller v. Pennsylvania R.R. Co., 89 A.2d 809, 811-12 (Pa. 1952)). The McMillin court considered “what was the information in the possession of the persons who appealed from the probate that induced them in so doing,” id. at 321, and concluded that the facts that “were known to instant petitioners when the appeal from probate was filed” established probable cause, id. at 322.
The notion set forth in McMillin that the contestant must possess facts to support probable cause at the time the proceedings are instituted is embodied in the Pennsylvania statute, which provides that a no-contest clause is unenforceable “if probable cause exists for instituting proceedings.” See 20 Pa. C.S. § 2521. This requirement also is part of the definition of “probable cause” in all three Restatements of Property. See Restatement (thiRd) of
PRoPeRty, donative tRansfeRs § 8.5 cmt
c (stating “Probable cause exists when, at the time of instituting the proceeding, there was evidence that would lead a reasonable person, properly informed and advised, to conclude that there was a substantial likelihood that the challenge would be successful.”); see also Restatement (second) of
PRoPeRty, donative tRansfeRs § 9.1 cmt
j; Restatementof PRoPeRty §§ 428 cmt k,
429 cmt i.
In concluding that the unsuccessful contestant based his action on nothing more than unsupported doubts, the Superior Court in Simpson enforced a no-contest clause on grounds that “[m]ere unsubstantiated suspicions certainly cannot rise to the level of probable cause so as to avoid the imposition of the forfeiture clause.” Simpson, 595 A.2d at 100.
Merging the principles of Friend and Simpson, the Chester County Orphans’ Court defined probable cause as “a good faith belief rather than mere suspicion, disappointment or resentment.” Vanderkraats (No. 3), 14 Fiduc. Rep. 2d at 167. The court enforced a no-contest clause, after granting a non-suit in the underlying will contest, because although the contestant may have truly believed his allegations, “an objective review of the evidence he assembled and offered should have given him pause to reconsider, unless he had some further motive of personal gain, chagrin, or resentment of the benefit conferred by his father on his widow.” Id. at 168.
In a case that involved attacks on administrative provisions – rather than just the administration by the fiduciaries – the Montgomery County Orphans’ Court made the following observation:
This distinction between permissible objections that attack a fiduciary’s administration and
impermissible objections that thwart the testator’s intent is part of the analysis for probable cause that must be performed under PEF Code § 2521. Probable cause would exist in those proceedings where a fiduciary’s
administration or handling of trust assets is questioned. In these cases, an in terrorem clause is unenforceable. On the other hand, an in terrorem clause could be enforced where the objections are a disguised attempt to controvert or rewrite the decedent’s testamentary
scheme. In these latter cases, the objections are raised for improper purposes and lack a probable cause basis.
Volchok, 25 Fiduc. Rep. 2d at 118. In Volchok, the no-contest clause in the will and the deed of trust stated:
Should any Beneficiary under [this] my Will or my Deed of Trust, or anyone related to a Beneficiary by blood, marriage or adoption, challenge or take any action to alter or set aside any provision of [this] my Will or my Deed of Trust, or any other aspect or provision of my estate and dispositive plan, including without limitation, any provision of [this] my Will or my Deed of Trust, … such Beneficiary and his or her Issue shall be deemed to have predeceased me for all purposes hereunder and shall be denied any and all benefits of [this] my Will and my Deed of Trust otherwise conferred on him or her. The action or conduct of anyone related to the Beneficiary as above shall be deemed to be the act of the Beneficiary.
Id. at 116 (emphasis and parentheticals in original). The testator/settlor’s grandchildren filed a petition for annual court accountings and objections to pending accounts of the estate and trust. The “substantive” objections related to missing information about a partnership interest, excessive expenses, fiduciary commissions and legal fees. However, the grandchildren also sought information regarding future discretionary distributions before any such distributions were made and wanted to approve the trustees’ investment philosophy and selection of the investment adviser and real estate management company. See id. at 114-15. In return, the fiduciaries asserted that the petition and objections constituted an attempt to “ ‘challenge, alter or set aside’ provisions of the deed (Continued on Page 12)
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Litigating a ‘No-Contest’ Clause
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Litigating a ‘No-Contest’ Clause
(Continued from Page 11) of trust.” Id. at 113.
The court framed the issue as whether the contestants were entitled to the requested information, the requested accounts and the input into the fiduciaries’ decisions, or whether such requests were attempts to alter or set aside provisions of the deed of trust. See id. at 119. After observing that a settlor can specify the administration, the standard of care and the degree of fiduciary discretion, the court analyzed at length specific administrative provisions of the deed of trust relating to discretionary distributions, the frequency of filing accountings, investment discretion and the selection of professional advisers. See id. at 119-124. Following this discussion, the court enforced the no-contest clauses because the “information and involvement sought by the grandchildren in this case exceeds the bounds of good faith and is an effort to alter and set aside provisions of the deed of trust noted above.” Id. at 124. The petition and objections, the court concluded, “are unsupportable and lack probable cause.” Id. at 125.
The basis for the conclusion that no probable cause existed in Volchok – i.e., a thorough review of the underlying documents – led to an identical result in Izzard, supra. In that case, the court was asked to find that the decedent’s assets passed under an irrevocable inter vivos trust that had been executed by decedent’s agent under power of attorney, who also was the beneficiary advocating that position. However, the power of attorney did not give the agent the ability to execute the irrevocable trust, which varied the terms of decedent’s testamentary scheme without her authorization. The court found the beneficiary “had neither probable cause nor reasonable basis” in pursuing her attempt to circumvent the will and enforced the forfeiture clause, because a plain reading of the documents in question would have alerted the beneficiary to problems with her position. See 29
Fiduc. Rep. 2d at 78.
Another factor courts will consider in a probable cause evaluation is whether the contestant relied on advice of counsel in instituting the proceedings. However, such reliance will not automatically result in a finding of probable cause. See Friend, 58 A. at 857 (stating “if the mere advice of counsel can be regarded as probable cause for instituting proceedings to contest a will, there would be none without cause”). The Restatement suggests that the court should contemplate whether “the beneficiary relied upon the advice of independent legal counsel sought in good faith after a full disclosure of the facts.” Restatement (thiRd) of PRoPeRty,
donative tRansfeRs § 8.5 cmt c; see
also Restatement (second) of PRoPeRty,
donative tRansfeRs § 9.1 cmt j.
When to Raise Issue of Forfeiture and Probable Cause
The question of when a court should evaluate the application of the no-contest clause and the existence of probable cause depends on the nature of the contest. Where the proceeding is a will contest, a determination of probable cause generally cannot occur until the conclusion of the matter, because if the will is declared to be invalid, the no-contest clause falls with it. Cf. Worley, 4 Fiduc. Rep. 2d 319 (determining, while parties were engaged in settlement discussions, that clause did not apply). Underscoring the reluctance of courts to impose forfeiture, a trial court may be willing (or directed) to reconsider a ruling of forfeiture, if rendered without first affording the beneficiary an opportunity to demonstrate probable cause. See Lewis, 19 Pa. D. 432, 1910 WL 3789, *1 (remanding matter to auditing judge to determine whether contestant was “justified in her proceedings before the register”).
It may be advisable for counsel for the will proponent to depose the contestant immediately after the litigation commences to determine at the outset whether the contestant has probable cause. However, even if it appears that the contestant
lacked probable cause to institute the proceedings, a court should not dismiss the contest on those grounds – even if it is apparent that forfeiture would result from an unsuccessful contest – because the contestant may yet prevail. Stated otherwise, a court should not presume that, merely because the contestant lacked probable cause, he necessarily will lose the contest.
Where the case involves an attack on provisions of the will, an evaluation of probable cause can, under certain circumstances, be addressed before the underlying merits are considered. In Volchok, supra, for example, the parties had been litigating various issues for more than two years and already had held two hearings. Before matters proceeded on a petition for accountings and objections to an account, however, the court concluded that it “must” initially decide whether the in terrorem clauses in the decedent’s will and trust were triggered by the contestants’ petition and objections because, if so, the petition would be dismissed, and the objections would be moot. See Volchok, 25 Fiduc. Rep. 2d at 115-16. In doing so, the court sent the message that, under appropriate circumstances and where judicial economy would be served by avoiding potential lengthy and costly litigation, it may act swiftly and decisively on the issue of forfeiture.
As demonstrated by Mitchell, a court also may consider making a pre-emptive ruling that a party’s decision to pursue a certain course of action might, or might not, invoke the no-contest clause. See 20 Pa. D. & C. 101.
Parties upon Whom Forfeiture is Imposed
The beneficiaries, or class of beneficiaries, to whom a forfeiture clause applies necessarily must be identified in the clause itself. Occasionally, however, that will require the court to determine whether to enforce a clause against individuals who were neither nominal parties nor involved at all in the litigation. The outcome in such cases, as it must, depends upon the testator’s intent.
This question was first addressed in Simpson, in which the clause at issue mandated forfeiture not only of the contestant’s interest, but also of the interests of anyone who cooperated in the contest. See Simpson, 595 A.2d at 101. The court concluded that the siblings of the contestant, while not nominal parties, nonetheless were “contesting the will every bit as much as their brother” and that the contest was a “collaborative effort.” Id. at 100-01. Treating a beneficiary who acts in concert with the nominal party as a contestant himself, the court reasoned, “promote[s] the intentions of the testator” and “promotes the favorable public policy of limiting costly, time-consuming litigation against the estate when such litigation is not founded upon probable cause but rather upon disappointment over amount received.” Id. at 100. “To hold otherwise would be to exalt form over substance.” Id.
The issue was a bit trickier in Volchok, where the clauses at issue provided that if a beneficiary (or anyone related to a beneficiary by blood, marriage or adoption) challenged or took any action to alter or set aside any provision of the will or trust, such beneficiary and his issue would be treated as having predeceased the decedent. See Volchok, 25 Fiduc. Rep. 2d at 116. After multiple beneficiaries filed a petition seeking annual accountings and objections to pending accounts, the court had to consider two issues: (1) how to treat a beneficiary who had filed objections on behalf of his minor child, but not individually, and (2) how to treat the interests of minor and unborn beneficiaries, who were represented in the proceedings by a guardian ad litem
but who had not joined in or pursued the relief sought.
Relying on Simpson, the court did not hesitate in enforcing the no-contest clause against the father of the minor beneficiary because to decide otherwise would be to elevate form over substance. See id. at 125. Moreover, the court found that the father forfeited his interest because the challenge was brought on behalf of his daughter, to whom he was related by blood within the meaning of the no-contest clause. See id. at 125-26.
The Volchok court was far more troubled in reaching the conclusion that the interests of the minor and unborn beneficiaries also were forfeited despite the guardian ad litem’s position that forfeiture in such a case should be void as against public policy because there was nothing these beneficiaries could have done differently. See id. at 126. The court found the clause to be unambiguous and would not apply a public policy exception, which generally is used to invalidate forfeiture clauses imposing restraints on marriage or trade, or interfering with freedom of conscience or religion. The court also considered that, under the terms of the will and trust, the testator/settlor had not planned for his great-grandchildren to have vested interests in any trust remainder. Accordingly, relying on the language of the no-contest clause and the dispositive provisions of the will and trust, the court concluded that enforcing the clause against the minor and unborn beneficiaries was consistent with the decedent’s intent. See id. at 127-28.
Finally, an appropriate action by a guardian and trustee ad litem, even if unsuccessful, might not result in forfeiture of the minor beneficiaries’ interests. See Mitchell, 20 D. & C. 101. (Contrast Mitchell with Volchok, in
which forfeiture was imposed on the minors over the objection of the ad litem because of the broad language in the no-contest clause.) Similarly, an action brought by the attorney general, as parens patriae, would not bar the charitable beneficiaries from receiving their bequests even if the forfeiture clause were valid and enforceable. See Lewis, 20 Fiduc. Rep. 2d 249.
Conclusion
Great care and consideration must be given before initiating an action that could implicate a no-contest clause. Not only could forfeiture following an unsuccessful contest result in a lost gift for the beneficiary, but it also could lead in some cases to a malpractice action against the attorney or an action against the beneficiary by other individuals whose shares are lost due to the beneficiary’s contest.
Accordingly, in light of the probable cause exception, counsel conducting its pre-litigation investigation should carefully document the steps he took and the facts he (or the client) discovered prior to instituting the proceedings. Counsel should be able to provide the client with “an objective review of the evidence assembled” and differentiate between an action that is “justified under the circumstances” and one that would be the “mere vexatious act of a disappointed [beneficiary].” With probable cause documented and the client able to make an informed decision, counsel should be able to clear at least one hurdle with relative ease. n
Adam T. Gusdorff is Of Counsel at Ballard Spahr L.L.P. in Philadelphia and focuses his practice on Orphans’ Court litigation involving trusts, estates, non-profit corporations, guardianships and other fiduciary matters.
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Litigating a ‘No-Contest’ Clause
