Implementing a No-Contest Clause

Many people realize when creating a will the possibility that a beneficiary could contest their wishes if an uneven or unexpected distribution takes place.  When creating a will, some may wish to favor one beneficiary over another, while others may wish to benefit a non-profit or charity instead of a familial beneficiary.  The most likely scenario regarding an upset beneficiary is a challenge to the validity of the will.  Although the possibility of someone contesting a will cannot be rid of entirely, a clause to consider implementing is a no-contest clause, or what has formerly known as an “in terrorem” clause.

The no-contest clause is intended to dissuade a beneficiary from certain acts through the potential forfeiture of benefits.[i]  The clause essentially penalizes those who challenge its validity by either reducing a bequest to a nominal amount or forfeiting it entirely.[ii]  No-contest clauses are generally effective and enforced, often on the grounds that the intent of the testator should be given full effect.[iii]  However, these clauses are also generally construed narrowly by courts in preserving equity.[iv]

In Minnesota, the statute that guides this concept is Section 524.2-517 Penalty Clause for Contest[v], which reads:

A provision in a will purporting to penalize an interested person for contesting the will or instituting other proceedings relating to the estate is unenforceable if probable cause exists for instituting proceedings.

This statute gives the reader little specific guidance, except that the no-contest is unenforceable if probable cause exists.  If the beneficiary has probable cause or reasonable grounds to believe that the will was invalid, a court would generally allow the challenge to the will.[vi]

If the concept of a disgruntled beneficiary arises when creating a will, discuss various options of no-contest clauses with your attorney.  Generally, the best no-contest clauses provide bequests to potential challengers in an amount sufficient enough for them to carefully consider the option of losing that bequest by commencing a baseless contest in court.  This no-contest clause should also be explicitly stated and as narrowly drafted as possible.