Triggering In Terrorem Clauses With Out-Of-State Will And Trust Contests

In terrorem provisions, which are more commonly known as “no contest” clauses, generally state that beneficiaries forfeit their interests in estates and trusts by contesting the validity of the governing instruments (see Matter of Kalikow, 23 Misc3d 1107[A], at *2 [Sur Ct, Nassau County 2009] [discussing in terrorem clauses]). While strictly construed, such clauses are enforceable in New York (Matter of Ellis, 252 AD2d 118, 127-28 [2d Dept 1998]). They serve several important purposes, such as preventing challenges to wills which might result in trials, jeopardize the testator or grantor’s testamentary or inter vivos plans, or harass other beneficiaries (Matter of Singer, 17 Misc3d 365, 370 [Sur Ct, Kings County], aff’d, 52 AD3d 612 [2d Dept 2008], leave granted, 11 NY3d 716 [2009]; Tumminello v Bolten, 59 AD3d 727, 728 [2d Dept 2009]). 

In Shamash v Stark, Surrogate Kristin Booth Glen of the Surrogate’s Court, New York County, recently addressed an issue of first impression in New York (Shamash v Stark, NYLJ, 6/16/2009, at 38, col. 2 [Sur Ct, New York County]). The issue was whether will and trust contests in Florida, where no contest clauses are void as against public policy (F.S.A. § 732.517), triggered an in terrorem clause contained in a New York trust instrument (Shamash, supra).[1] 
 

In Shamash, the decedent’s revocable trust, which was governed by New York law, provided that any beneficiary who contested his will or trust would forfeit his or her interest in the trust (id.).  After contesting the will and trust in Florida, the petitioner commenced an accounting and removal proceeding with respect to the trust in the New York Surrogate’s Court (id.). The respondents moved to dismiss the Surrogate’s Court proceeding, arguing that the petitioner was not a beneficiary of the trust estate, and therefore lacked standing to maintain the proceeding, because he had triggered the trust’s in terrorem clause by contesting the will and trust in Florida (id.). In opposition, the petitioner asserted, among other things, that he did not trigger the in terrorem clause because no contest clauses are void under Florida law (id.).

The Surrogate’s Court dismissed the petition, holding that the petitioner lacked standing to seek an accounting or removal with respect to the trust (id.). The court reasoned that: (1) the trust is governed by New York law; (2) in terrorem clauses are enforceable in New York; and (3) the petitioner triggered the trust’s in terrorem clause by contesting the decedent’s will and trust in Florida (id.). The fact that no contest clauses are void as against public policy in Florida was immaterial (id.).

The lesson to take away from Shamash is that the contest of a will or trust in another state, where in terrorem clauses are not enforceable, may trigger such a clause in a New York instrument and result in the forfeiture of a beneficiary’s interest in the subject estate or trust.