Closing the Loopholes: New Laws For In Terrorem (No Contest) Clauses In Wills And Trusts

Continuing with its effort to make New Hampshire the best trust environment in the United States, legislators recently took steps to reform some of its estate and trust laws.

The legislature has made a commitment to be the "most attractive legal environment . . . for trusts and fiduciary services"1 by making an "attractive legal and financial environment for individuals and families seeking to establish and locate their trusts and investment assets"2 to New Hampshire. On July 13, 2011, Governor Lynch approved Senate Bill 50, which became effective on September 11, 2011, changing various laws relating to wills and trusts.3 This article relates solely to the provisions of the statute regarding "no-contest" provisions, also known as "in terrorem" or "anti-contest" clauses, in wills and trusts. The text of the new legislation can be found at http://www.gencourt.state.nh.us/legislation/2011/SB0050.html .

The new laws in Senate Bill 50 codified existing law, expanded the application of no-contest clauses to trusts,4 and enumerated exceptions. Overall, these new laws make it more difficult for beneficiaries to contest the provisions of a will and trust that contain no-contest provisions. The law closes loopholes and gives great deference to a testator's (or settlor's) wishes.

APPLICABILITY

RSA 551:22 relates to the enforcement of no-contest provisions in wills, whereas RSA 564-B:10-1014 relates to the enforcement in trusts. Both statutes are applicable to "all judicial proceedings concerning the enforcement or interpretation of no-contest provisions commenced on or after September 13, 2011."5 The provisions of both statutes mirror one another, with references to wills and trusts and executors and trustees, accordingly.

DEFINITION OF A NO-CONTEST PROVISION

A no-contest provision is defined as a provision that "if given effect, would reduce or eliminate the interest of any beneficiary of such will [or trust], who directly or indirectly, initiates or otherwise pursues"6 an action that 1) contests the admission or validity of the will or trust 2) sets aside or varies the terms of a will or trust,7 3) challenges the acts of the executor or trustee in the performance of his duties as described in the will or trust; or 4) frustrates or defeats the intent of the testator or settlor as provided under the terms of the will or trust.8 To be applicable, the no-contest provision must apply to a beneficiary under the will or trust.9 The attorney preparing a will or trust should be careful to leave the beneficiary to be excluded an interest under the Will or Trust so that the provisions of the no-contest clause are applicable.

RSA 551:22, II. and RSA 564-B:10-1014 (b) specifically provide "a no-contest provision shall be enforceable according to the express terms of the no-contest...