Two recent decisions illustrate the continued mixed reception that “in terrorem” clauses in wills or trusts, also known as “no-contest” clauses, receive in the New York courts. Generally, such clauses provide that a beneficiary forfeits his or her interest under the will or trust upon contesting the terms of the will or trust.

In Application of Follman, 197 N.Y.S.3d 682 (Surr. Ct. Queens September 25, 2023), petitioner sought a ruling in Surrogate’s Court that the in terrorem clauses in trust documents would not be triggered by petitioner seeking information and an accounting from the trustee. The clause in question, in fairly typical verbiage, provided that any person “who directly or indirectly opposes,” among other things, “the validity or administration of the trust created by this instrument or any other trust created by the Grantor … shall forfeit all rights to receive any property bequeathed hereunder….” Pointing to transfers from the trusts that he deemed questionable, petitioner sought comfort from the court that he could petition for information about the transfers, and an accounting, without triggering the in terrorem clause. The respondent trustee, in turn, requested a ruling that petitioner’s filing by itself triggered the clause.

The court noted that “In terrorem clauses, although not favored and strictly construed, are enforceable.” Because, in the Court’s view, “petitioner is seeking the Court’s opinion on a hypothetical question regarding a proposed and unfiled proceeding,” the court dismissed the petition. However, the court declined to find that petitioner’s petition by itself triggered the in terrorem clause, stating “the mere consideration of taking legal action cannot be a basis for triggering an in terrorem clause….”

While the Follman court’s discussion suggested that, if the petitioner had filed for the relief under discussion, the in terrorem clause would have been triggered, the Appellate Division’s decision in Matter of Aoki, 2023 WL 7762628 (1^st Dep’t November 16, 2023), provides grounds to argue otherwise. Affirming the Surrogate’s Court, the Appellate Division found that “[t]he trustee failed to establish that petitioners … violated the no-contest clause of decedent’s will by asserting claims in an accounting proceeding, by commencing proceedings for construction of the will under SCPA 1420, and by seeking removal of the trustee, thus forfeiting their bequests….” The court found that petitioners’ initiation of the will construction proceeding “was protected by the safe harbor provision of EPTL 3–3.5(b)(3)(E), which expressly provides that commencement of a construction proceeding does not violate a no-contest clause in a will …. Similarly, with respect to the removal and accounting proceedings, it is against public policy for a testator to take steps to render a trustee immune from liability for failure to exercise reasonable care, diligence, and prudence (EPTL 11–1.7[a]). We reject the trustee’s argument that the decedent’s intent to bar will contests must necessarily predominate.”

The takeaway: In terrorem or no-contest clauses present complex issues involving a beneficiary’s risk of forfeiture of his or her bequest, and have received mixed reactions in the courts. Parties faced with such a clause should consult with counsel experienced in such matters before making a decision whether to contest a will or trust provision.