Trying to Prevent Estate Litigation through In Terrorem Clauses is Often an Empty Gesture
by David A. (Andy) Hall
Sometimes an estate client will anticipate that there will be a challenge to her estate after she dies – and frankly if there is a house, then in this area its generally worth at least a couple hundred thousand dollars, thus, it’s worth fighting over. Perhaps her children do not get along. Or there is a family business in which one relative has spent many years alongside to build and grow, and the client wishes to leave that relative a larger share of the business. In an effort to prevent challenges to her will, a client may ask her estate planning attorney to utilize an in terrorem clause. These can also be known as “no-contest” clauses. An in terrorem clause essentially states that when someone objects or attacks the will (through the appropriate legal process), then the challenger will no longer receive a legacy or residual distribution that they otherwise would have received through the will.
Under Maryland law, an in terrorem clause in a will is void where there exists probable cause for instituting law suit. Md. Code, Est. & Trusts Art. § 4-413. Someone considering whether or not to challenge a will should consult with an experienced estates and trusts attorney to determine whether there exists probable cause to challenge a will.
An in terrorem clause is ineffective from preventing a challenge by someone who is disinherited as there is no stick (or carrot) to make the challenger think twice prior to challenging. If they have nothing to lose, then there is nothing to prevent them from hiring an estate litigation attorney to challenge the will.
A no-contest or in terrorem clause may still be a good idea to include in your estate planning documents depending on your particular family dynamics. While no clause can prevent all estate litigation, these clauses may be useful in preventing meritless litigation, i.e., a baseless challenge designed to extract a monetary settlement. In addition, it may be a useful tool for your personal representative to use when negotiating a settlement with a will challenger as it can make estate litigation an all-or-nothing proposition.
No one wants to think about their family fighting over their estate. Having a thorough and frank conversation with your estate planning attorney can help identify red flags and allow the planning attorney to attempt to draft around those challenges. One such solution is appointing a third party as personal representative because the disinterested person can help prevent the estate administration from becoming a battle ground for long simmering family disputes. Avoiding estate and trust litigation before it starts can save your family many tens of thousands of dollars in costs.