Who should be afraid of an in terrorem clause? You, that’s who.
What is an In Terrorem Clause?
An in terrorem clause is a no-contest, or forfeiture, clause often found in wills. Although the wording may vary, the typical wording provides that a beneficiary who challenges or disputes the validity of the will is disinherited.
How In Terrorem Clauses Work
A quick example. Mom signs a will that leaves you her house and car, and your brother the remainder of her estate. The will contains a in terrorem clause. You think your brother is going to end up getting more than you, so you challenge Mom’s capacity to execute the will. You lose your challenge.
Your reward? You end up forfeiting both the house and the car. Your brother takes all.
The Purpose of the In Terrorem Clause
In terrorem clauses, in the words of the Amarillo Court of Appeals, “allow the intent of the testatrix to be given full effect and seek to avoid vexatious litigation among family members.” Your mom clearly did not want the family members fighting each other over their inheritance. Including the clause in her will was her way of discouraging family discord. She was essentially urging you to take what you get gracefully. That’s your mom, still parenting from the grave.
You should have listened. While courts narrowly construe in terrorem clause to avoid forfeiture, that doesn’t mean they ignore them. A lawsuit challenging the testamentary capacity of the testatrix is one type of contest that results in forfeiture.
So is challenging your mom’s choice of executor. Suppose she named your brother as her executor. You want more control, so you challenge your brother serving as the executor. You lose your challenge.
Cue the in terrorem clause. Your attempt to set aside the part of her will naming an executor was a contest of her will. You just forfeited the house and car, again.
Enforcing the In Terrorem Clause
In terrorem clauses are enforceable unless the contestant shows that just cause existed for bringing the action, and the action was brought and maintained in good faith. That provision can be found in a statute in the Texas Estates Code.
Nothing is simple, however. The terms “just cause” and “good faith” are not defined in the statute. So we turn to case law, which is found in the opinions of the appellate courts.
Good Faith
Returning to the Amarillo Court of Appeals, we find that in a 2023 opinion the Amarillo court defined “good faith” as an action prompted by honesty of intention or a reasonable belief that the action was probably correct.
Just Cause
The Court defined “just cause” as bringing actions that are based on reasonable grounds, with a fair and honest reason for the contestant’s actions.
The trial court decides on a case-by-case basis whether a contest was brought in good faith and with just cause. That is a fact question. If the trial court does not decide that question, then the appellate courts have no jurisdiction to do so.
Process of In Terrorem Clause Enforcement
Here is how it works mechanically. You file your contest of your mom’s will alleging she had no capacity when she executed the will, and further stating that you had just cause to bring the contest and did so in good faith. Your brother files an answer denying your contest, and further alleging that you just violated the in terrorem clause. The court rules against you, and then you must prove the good faith and just cause elements just to avoid forfeiture.
Hammerle Finley is Here to Help You Understand Clauses
The in terrorem clause is meant to terrify you into reasonableness. It does a pretty good job. Learn more about this clause and get assistance adding it to your estate plan with the help of our expert attorneys. Schedule a consultation today.
Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship, and contested litigation. She may be reached at legaltalktexas@hammerle.com. This blog contains general information only and does not constitute legal advice.
