No-Contest Clause

A no-contest clause is a provision in a will, trust or similar instrument providing that a beneficiary who challenges it loses what the instrument gave them. California's Probate Code, whose Part 3 is headed "No Contest Clause," defines it at section 21310(c) as "a provision in an otherwise valid instrument that, if enforced, would penalize a beneficiary for filing a pleading in any court."

The naming is unusually varied for a single idea, and each version tells you something. California writes it unhyphenated, both in its part heading and in the definition itself. The Uniform Probate Code, and Minnesota's enactment of it at section 524.2-517, does not use the phrase at all: its section is headed "Penalty clause for contest," which describes the mechanism rather than naming the drafting device. The older name is in terrorem clause, from the Latin for "in fear," which is an accurate description of a provision whose entire function is to make a challenge look expensive rather than to make it impossible. Nothing turns on which name a document uses.

The structural point comes first, because it decides more outcomes than the law does: the clause bites only a beneficiary. A forfeiture provision takes away what the instrument gave. Someone the instrument gave nothing has nothing to lose by challenging it, so the clause is invisible to exactly the person most likely to be aggrieved. That is why the drafting move that actually uses the clause is to leave the person a bequest large enough that losing it would hurt, and it is why a document that cuts someone out completely and then adds a no-contest clause has done two things that do not work together.

The legal ceiling is probable cause, and the two statutory formulations differ in scope. Minnesota's is the whole uniform sentence: "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." Note how wide that is. It reaches an interested person rather than only a beneficiary, and it reaches "other proceedings relating to the estate" rather than only a challenge to the will, so the protection covers filings that are not attacks on validity at all.

California builds the same idea into a much more detailed structure. Section 21311(a) provides that a no contest clause "shall only be enforced against" three things: a direct contest brought without probable cause; a pleading challenging a transfer of property on the ground that it was not the transferor's property at the time of the transfer, and then only "if the no contest clause expressly provides for that application"; and the filing or prosecution of a creditor's claim, again only if the clause expressly so provides. Two of the three therefore depend on the drafter having thought of them, which means a standard clause reaches only the first.

"Direct contest" is a defined term, and the definition is the useful list. Section 21310(b) says a direct contest is one alleging the invalidity of a protected instrument or of one or more of its terms on any of six grounds: forgery; lack of due execution; lack of capacity; menace, duress, fraud, or undue influence; revocation, under the sections governing revocation of a will, of a trust, or of another instrument; and disqualification of a beneficiary under three named provisions. Anything outside that list is not a direct contest, so a petition asking the court to interpret an ambiguous provision, or to remove a trustee, is not the thing section 21311(a)(1) permits a clause to punish.

Probable cause has a statutory test rather than a feel to it. Section 21311(b): "probable cause exists if, at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery." Two features of that sentence matter. It is measured at filing, on the facts then known, so a contest that turns out to be wrong is not for that reason without probable cause. And it expressly contemplates that the evidence may not be in hand yet, since the belief is about what further investigation or discovery might produce.

Three further sections finish the picture and are easy to miss. Section 21312 directs that in determining the transferor's intent, a no contest clause "shall be strictly construed," which places the interpretive thumb against enforcement. Section 21314 provides that the part "applies notwithstanding a contrary provision in the instrument," so a clause cannot draft its way around the limits. And section 21313 is candid that the part "is not intended as a complete codification of the law governing enforcement of a no contest clause," with the common law governing to the extent the part does not apply, which matters because section 21315 confines the part to instruments that became irrevocable on or after January 1, 2001.

What all of this adds up to in practice is a provision whose value is mostly in the shadow it casts. A beneficiary weighing a challenge is weighing a certain loss against an uncertain gain, and the clause makes the certain loss concrete. Whether it is a good idea in a particular family is not a legal question. It deters the marginal challenge and the frivolous one, and it also deters the meritorious one brought by someone who cannot afford to be wrong, which is a real cost and not a rhetorical one.

1. The instrument includes the clause, typically saying that a beneficiary who contests it takes nothing under it.

2. A beneficiary files something. The clause is triggered by a filing, so the first question is always whether what was filed falls inside the categories the state allows a clause to punish.

3. The court asks whether the filing was a contest of the kind the statute reaches. In California that means a direct contest on one of six defined grounds, or one of two other categories only where the clause expressly says so.

4. If it was, the court asks whether there was probable cause at the time of filing, on the facts then known, allowing for what further investigation or discovery might have produced.

5. Only then is the forfeiture enforced, and California requires the clause to be strictly construed in working out what the transferor intended it to cover.

A hypothetical, showing what is actually at stake. Nadia's mother dies leaving an estate of $900,000. Her will leaves Nadia $75,000 and the residue of $900,000 − $75,000 = $825,000 to a charity, and it contains a standard no-contest clause. Nadia is the only child and her mother left no surviving spouse, so if the will were set aside and there were no earlier will, she would take the whole $900,000 under the state's intestacy rules.

The wager is therefore $75,000 of certain money against $825,000 of possible additional money, and the clause is what puts the $75,000 at risk. Suppose Nadia challenges on the ground that her mother lacked capacity, which is one of the six direct-contest grounds, and loses. If a court finds she had no probable cause at the time of filing, the clause is enforced and she takes nothing at all. If it finds she did, then under California's section 21311(a)(1) the clause is not enforced against her, and she keeps her $75,000 despite having lost.

Change the facts once. Suppose the will had left Nadia nothing. The clause now has no work to do: there is no bequest to forfeit, so the deterrent is zero and she can challenge the will at no cost beyond her own legal fees. A clause added to a document that gives someone nothing is decorative.

Change them again. Suppose Nadia had petitioned only to have an ambiguous paragraph interpreted, rather than attacking the will's validity. That is not one of the six grounds, so it is not a direct contest, and California's part does not permit a clause to be enforced against it.

The case for including one

• It gives a beneficiary a concrete reason not to file a marginal challenge, which is one of the few levers the author of a document still has once they are not there to explain it.
• Paired with a meaningful bequest it can be genuinely effective, because the person weighing a challenge is weighing a certain loss.
• It applies to trusts as well as wills in the states that define it broadly, so a plan built around a funded trust is not left without the tool.
• Where the drafter thinks about it, some states let the clause be extended to a couple of adjacent filings, such as a creditor's claim, by saying so expressly.

The case against, and its real limits

• It cannot reach someone who was left nothing, which is frequently the person most likely to challenge.
• Probable cause defeats it under both statutory schemes read here, and the standard is measured at filing on the facts then known, not by the outcome.
• It is strictly construed in at least one state, so ambiguity in the clause is resolved against enforcement.
• It deters a beneficiary with a genuine grievance and limited means just as effectively as it deters a frivolous one, and the two are not distinguishable in advance.
• It cannot prevent a filing. It can only make one expensive, and a determined challenger with independent resources is not affected by it.
• Statutes differ substantially on what counts as a contest and who is protected, so a clause drafted under one state's rules may be read against another's.