By Jeffrey Messing
February 20, 2015
No-contest provisions are sometimes included in wills or trusts to discourage beneficiaries from challenging their provisions after the testator/trustee has died. Generally they purport to disinherit any beneficiary who challenges the document and in some cases its administration. Such provisions in wills are unenforceable in Arizona if the beneficiary has “probable cause” to bring the challenge. A.R.S. § 14-2517; In re Estate of Shumway, 198 Ariz. 323, 9 P.3d 1062 (2000).
A.R.S. § 14-2517 and the Shumway case apply only to wills, but last month in In re Shaheen Trust, ___P.3d___, 2015 WL 224722 (Div. 2 1/16/2015) the Court applied the same rule to Trusts, following the suggestion of the Restatement (Second) of Property (Donative Transfers) § 9.1 cmt.1. Specifically the Court held: “the standard for evaluating the enforceability of such clauses does not differ between wills and trusts.” The Court also held that where the beneficiary brings multiple claims, each must be supported by probable cause, or the no-contest provision should be enforced so as to preserve “the transferor’s donative intent, avoiding waste of the estate in litigation, and avoiding use of a will contest to coerce a more favorable settlement to a dissatisfied beneficiary.” Shaheen (quoting Shumway 198 Ariz. at 323, ¶ 7, 9 P.3d at 1065).
On the facts of the case, the Trial Court had found at least one of the beneficiary’s had no merit. The Court of Appeals therefore held that the Trial Court erred by not enforcing the no-contest clause in the Shaheen case.