in terrorem clause

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in terrorem clause

(in tehr-roar-em) n. from Latin for "in fear," a provision in a will which threatens that if anyone challenges the legality of the will or any part of it, then that person will be cut off or given only a dollar, instead of getting the full gift provided in the will. The clause is intended to discourage beneficiaries from causing a legal ruckus after the will writer is gone. However, if the will is challenged and found to be invalid (due to lack of mental capacity, undue influence or failure to have it properly executed), then such a clause also fails. So a prospective challenger takes his/her chances. The courts have ruled that merely putting in a claim for moneys due from the estate is not a legal challenge to the will itself, and is permissible without losing the gift. (See: will, will contest)

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References in periodicals archive ?
Where a trust beneficiary challenged the validity of a trust amendment, and the probate court found that the beneficiary lacked standing to proceed with his challenge because he violated the amendment's no-contest clause, which forfeited his interest in the trust, the judgment is reversed and remanded because the probate court was required to first resolve the issue of the executor's testamentary capacity to execute the amendment.
Insert a no-contest clause that disinherits a beneficiary who contests a will and loses.
(230) The comments further explain that this rule "ordinarily" makes an otherwise valid no-contest clause "unenforceble to prevent or punish" a beneficiary who sues if the clause "would inhibit beneficiaries' enforcement of their rights under a trust (whether created by the will or other instrument) or would otherwise undermine the effective, proper administration of the trust." (231) The reporter's notes justify blanket nonenforcement by rationalizing that actions to enforce trustee duties often effectuate settlor intent and so are not "contests" but are more in the nature of construction proceedings.
But see Begleiter, supra note 5, at 645 ("[R]arely will a contest be successful but the no-contest clause be held valid.").
Gross includes the warranty clause within the larger category of "contingency clauses." He labels one contingency clause as the "no-contest clause" and distinguishes it from the warranty clause.
Similarly, if an institutional trustee inserts a far-ranging no-contest clause in an instrument, the party who profits is not the trustee, but any beneficiary whose gift is vulnerable to judicial challenge.
Likewise, a no-contest clause that favors one beneficiary over another can be construed as a powerful statement about love and trust.
A third avenue of defense is to include a no-contest clause in the will.(21) In Seward Johnson's case, he would have needed to alter his testamentary plan somewhat, and provide modest but conditional devises for each child.
Time for a chat with clients Protecting a no-contest clause: What you need to know Dealing with out-of-state property issues in estate plans
One stratagem that many estate planning attorneys opt for is a no-contest clause to be inserted in the documents.
"There's a very common technique of putting a no-contest clause in a will," says Nass.
Decanting, which involves the distribution of assets from an existing trust into a new trust with new terms, is regarded as an important tool for fixing broken trusts.<br />New Hampshire has also abolished the rule against perpetuities (which has definite appeal for wealthy clients), provided for the enforceability of no-contest clauses, adopted procedures for non-judicial dispute resolution, and recognized asset protection trusts.