A “No-Contest” clause is typically included in a Will or Trust to penalize anyone who challenges the validity of the Will or Trust. The no-contest clause typically states that if anyone contests the Will or Trust they will be disinherited. Such clauses can be effective, but they presume that the contestant has something to lose. The language of the no-clause clause can be narrow or broad, which in itself can lead to difficulty in interpretation of its application.
While Arizona has a statute governing the validity of no-contest provision in Wills, there is no similar statute expressly covering similar provisions in trusts. The statute governing wills provides that a no-contest provision is “unenforceable if probable cause exists” for the contestant to have filed their action. In other words, if the contestant had at least probable cause to challenge the Will they would not be disinherited.
Now, the Arizona Court of Appeals in In Re the Shaheen Trust (filed January 16, 2015) has confirmed that in Arizona a no-contest clause in a Trust is enforceable where the contestant had no probable cause to bring the claim. The Court held that although no-contest provisions in wills are governed by statute, and no-contest provisions in trusts are governed by the Restatement of Trusts, the standard for evaluating the enforceability of such clauses does not differ between wills and trusts. Of note, the Court of Appeals concluded probable cause must support each individual challenge brought to a donative transfer. In the Shaheen Trust matter the Court of Appeals held that one of the nine claims (all brought in the same petition) was not supported by probable cause and therefore, the contestants’ share of the Trust should be forfeited.
The take away: No-Contest Clauses in Trusts and Wills are enforceable in Arizona. If you are considering including a no-contest clause in your Trust or Will it should be carefully crafted with advice of counsel for maximum benefit, and if you are considering contesting a Will or Trust you should give careful consideration to the claim(s) made and the potential forfeiture risks posed and seek advice of counsel.
If you’re further curious about No-Contest Clauses and their application in estate law, feel free to get in touch with one of our elder law attorneys today.