by Jonathan A. Nelson
Virginia has a long and storied relationship with no-contest (or ‘in terrorem’) clauses, where a beneficiary can be cut out of an estate or trust if they bring a legal challenge to the testamentary document or certain incidents of administration. Many people writing estate plans see such clauses as an antidote to family dissention, protection against a particular black sheep, or just a way to provide a final “don’t tread on my estate plan” from the grave.
As with any sharp tool, these clauses must be used with care; not appreciating their dangers can have unintended consequences. A Virginia Supreme Court case from 1956, Womble v. Gunter, provides a stark warning of this possibility. The Court begins with a near-Dickensian opening paragraph presaging the conflict to come:
George F. Parramore, Sr., died testate on June 4, 1945. His somewhat complicated will, including five codicils, was duly probated and Benj. T. Gunter, Jr., and Quinton G. Nottingham qualified as executors. The testator devised and bequeathed all of his property in various amounts and proportions to his ten living children and numerous grandchildren.
In all, there were thirty named family beneficiaries among the six documents. The Will had a no-contest clause, which ended with, “Should all my legatees and devisees contest my will, then my entire estate shall pass to Christ Episcopal Church in Eastville.” Although not discussed in the opinion, once admitted to probate, the will and all five codicils became treated as one document, with the result that a challenge to even one portion became a challenge to the whole unless fully successful.
The hitherto amicable family descended into dissention, centered on a suit to invalidate the will. When the dust had settled, the trial court concluded that all thirty beneficiaries had challenged the will and lost any benefit from the estate.
Although not in the Supreme Court record, I think it a good assumption that at least some of the codicils reflected changes between the interests of the different beneficiaries and changes of who the executors would be; further, because the changes were by codicil, the beneficiaries could see the changes over time. This seems supported by the court’s finding that the family had fractured, “charging each other with misrepresentation, fraud and deceit,” and the suit brought “to satiate their dissatisfaction and impatience.”
The Virginia Supreme Court dealt with a number of questions raised by different groups of beneficiaries:
Does it matter if the contest was brought in good faith or with probable cause? Not here.
Does it matter if a contestant withdrew before the final order? No, they still brought the contest.
Does it matter if a beneficiary was a minor and the contest was brought by a representative? No.
Of importance for estate planning, the Court interpreted the clause strictly by the terms used in the will:
The court is not concerned with whether an heir or a devisee receives the property of a decedent. The normal freedom of the owner to dispose of his property as he sees fit should not be curtailed unless the disposition violates some rule of law or is against public policy.
Used indiscriminately, a no-contest clause can create difficulties resolving genuine disputes (such as working through this series of documents or ensuring a fiduciary is handling matters correctly), can disincentivize compromise (once the suit was filed, all benefit was lost unless successful), and may result in a more severe penalty than desired.
In Virginia, no-contest clauses are still upheld on the exact language actually used, as described in Hunter v. Hunter (Va. 2020):
We have reconciled these competing values by stating that no-contest provisions are simultaneously “strictly enforced” and “strictly construed.” By strictly enforced, we mean that we will enforce the provision without any wincing on our part concerning its alleged harshness or unfairness — so long as the testator or settlor clearly intended the forfeiture. By strictly construed, we mean that the intent to forfeit must be very clear. .
So, for instance, a grantor of an irrevocable trust with a no-contest clause who is also its sole beneficiary forfeits his rights as beneficiary if he challenges the trust trying to get his money back. McMurtrie v. McMurtrie (Va. 2021, unpublished).
Much of the animosity between George Parramore’s family members seems to have come not from the litigation itself, but in recriminating each other over the application of the no-contest clause. Ultimately, the only winner was Christ Episcopal Church in Eastville, which was probably not the result Mr. Parramore was hoping for. If you are thinking of using a clause like this, discuss the details with an attorney who has seen how they have been applied in administration and litigation so you get the result you are looking for when the terms are “strictly enforced” and “strictly construed.”
Virginia attorney Jonathan A. Nelson uses his extensive legal knowledge and trial experience to resolve conflicts, negotiate settlements, navigate compliance matters, and vigorously advocate in the courtroom in order to achieve the best possible outcomes for his clients. He practices in estate planning, probate, trust and estate administration, corporate law, and civil litigation related to these fields.
The attorneys of Smith Pugh & Nelson, PLC, offer the experienced counsel, personal attention, and customized legal services needed to address the many complex issues surrounding estate planning, probate, and trust administration. Contact us at (703) 777-6084 to schedule a consultation.