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Tuesday, June 22, 2021

In Terrorem Clauses Have Power in Massachusetts

One of the most powerful clauses in a will or a trust is the in terrorem clause, which is more commonly referred to as a “no-contest” clause.  In terrorem means “in fear” in Latin and is an appropriate name for the clause as if someone challenges a will or a trust with an in terrorem clause and the challenge is not successful, there can be dire consequences for the challenger.  Namely, a challenger to a will or trust with an in terrorem clause risks losing all of his or her rights and interest under a will or trust.

Almost a year ago, the Massachusetts Appeals Court ruled in the matter of Capobianco v. Dischino, Mass. App. Ct. 19-P-197 and 19-P-199.  The Court recognized the continuing viability of in terrorem clauses in Massachusetts wills and trusts by affirming a probate court judgment ruling that the beneficiary under a trust forfeited his interested in the trust when he filed a lawsuit to remove the trustees, requested (against the provisions of the trust) that he be named the sole trustee, requested that he be named the sole manager of two limited liability companies held in trust, and sought to enjoin the trustees from administering the trust in the meantime.  As a result of his failed challenge to the provisions of the trust, the beneficiary lost all of his rights and interest in the trust.   Had this beneficiary filed an action against the trustees for breach of fiduciary duty, there may have been a different outcome.

In Massachusetts, in terrorem clauses are provided for by statute under M.G.L. c. 190B, section 2-517 which states "[A] provision in a will purporting to penalize an interested person for contesting the will or instituting other proceeding relating to the estate is enforceable."  While this statute only addresses the use of an in terrorem clause in wills, in the matter of Ginsberg v. Ginsberg, 34 Mass. L. Rptr. 589 (Mass. Super. Ct. 2017), the Court held that no-contest clauses are enforceable in Massachusetts in inter vivos trusts as well as wills.

While there are exceptions to the rule (aren’t there always?), if a will or trust contains a non-contest clause, the Court is likely to enforce it.  One common exception is that if the individual who executed the will or trust lacked capacity at the time of execution (and therefore was subject to undue influence or fraud), the Court may reject the in terrorem clause.  However, reasonable requests such as a beneficiary asking the trustee for an accounting or seeking interpretation of the instrument should not trigger an in terrorem clause.  However, challenging the beneficiaries or asking that the trustee be removed without due clause could very easily trigger the in terrorem clause so careful consideration and planning needs to happen before pursuing such litigation.

If you have questions regarding estate planning, wills, trusts, or probate, please contact the Law Offices of Samuel S. Reidy for a free consultation.

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