In this article we’ll be discussing what in terrorem clauses are as they relate to an individual’s estate plan and when, if ever, they should be used.
“In terrorem” comes from the Latin for “for fear” and an in terrorem clause is a provision in an individual’s will that threatens to disinherit a beneficiary (or otherwise reduce their share of an estate) who challenges the legality of a will or any sub-part thereof.
Testator’s include such clauses in their wills to place beneficiaries in fear of missing out on what they would otherwise receive from the estate in the event they (the beneficiary) takes issue with the will. However, if a beneficiary challenges the validity of a will that they’re designated to receive a share under and the will is found invalid (whether (1) for lack of testator’s capacity, (2) undue influence, or (3) the will was not properly executed), the in terrorem clause will also be invalidated.
As an aside, any claim initiated by a beneficiary for moneys due to the beneficiary under a will have not been found to be a challenge to the will’s legal sufficiency. In other words, if an individual is a named beneficiary to a will that contains an in terrorem clause and makes a claim for what is due to them, the in terrorem clause will not be invoked and the beneficiary will not be disinherited.
In Kent v. McKay, 139 DLR (3d) 318 (BCSC), three basic requirements were established for a valid in terrorem clause:
In Illinois, in terrorem clauses containing clauses forbidding a will contest are generally valid. In re Estate of Mank, 298 Ill. App. 3d 821, 825 (1998). However, courts will typically construe them as strictly as possible to avoid forfeiture. Mank at 826.
Illinois courts recently dealt with the issue of whether an in terrorem clause was valid and required disinheriting a beneficiary in Alexander v. Nordsiek, 2015 IL App (4th) 1410967-U (Ill. App. 2015).
In Alexander, a parent deceased leaving behind a will and four children. The will named the four children as co-executors of their parent’s estate. Shortly prior to their mother’s death, a guardianship action was initiated by three of the siblings against the fourth sibling, who was named the mother’s power of attorney (POA) for healthcare. At issue in the guardianship proceeding was whether the POA sibling was acting in the mother’s best interest by hiring round-the-clock, in-home nursing. The guardianship matter was never resolved as the mother passed away shortly before it went to hearing.
Not long after the mother’s passing, the POA sibling sought to file her mother’s will and open a probate matter naming her (the POA sibling) as executor of the estate, against the mother’s will which, again, named all four children as co-executors. Her support for seeking such relief was that she did not feel the four siblings could properly administer the estate due to the then-ongoing contentious guardianship matter.
The remaining three siblings petitioned the court claiming that the POA sibling violated the in terrorem clause which sought to prevent any contestations against the will’s validity or asserting a claim based on an alleged agreement. The trial court said the POA sibling’s probating the mother’s will was not a violation of the in terrorem clause and the remaining siblings appealed.
On appeal, the appellate court also held in favor of not disinheriting the POA sibling. In doing so, the appellate court, in keeping with what has previously been detailed regarding Illinois courts strictly construing in terrorem clauses, considered the specific language of the clause - namely that the clause (1) forbid contesting the validity of the will and (2) forbid asserting a claim based on an alleged agreement. It was the appellate court’s position that the POA sibling, in filing a Petition for Probate and seeking to be named as the sole executor because of the ongoing dispute between the siblings neither contesting the validity of the will or asserting a claim based on an alleged agreement. It merely presented concerns associated with the administration of the estate.
As you can see, especially in the Alexander example, courts do not like forcing a beneficiary to forfeit their inheritance and will, at the least, attempt to construe the in terrorem clause as specific as possible to that end.
What this might mean for including an in terrorem clause in your estate planning (as they can be used in both wills and trusts) is that that the testator has a false sense that they’ve successfully avoided conflict among their beneficiaries while the beneficiaries may still squabble. Some alternative pathways to in terrorem clauses would be directing any conflict arising out of the will (or trust) to mediation or arbitration for determination of the issue(s). Another alternative would be providing the gifts during the lifetime of the testator. For example, if the testator wishes to gift $10,000 each to three children and $2,000 to a fourth child, the testator should make the gift during their lifetime instead of leaving it to probate where, if there’s no will or an invalid in terrorem clause, the four children are likely to split $32,000 ($8,000 per child) instead of three receiving $10,000 and the fourth receiving $2,000.
As a final thought, as more and more courts seem to view filing a will or a claim for monies due under a will as not triggering the in terrorem clause and disinheriting the beneficiary, combined with the court’s general reluctance to require a party’s forfeiture, the use of an in terrorem clause may not be the best method to protect assets or interests at a person’s time of passing.