To defend against the bad seed
and to protect the other people receiving bequests from the estate, attorneys place
poisonous pills in the will or trust to disinherit the bad seed if he/she files
a lawsuit to protest the estate plan or the administration of the estate. These clauses are called “in terrorem” clauses. These clauses are designed to “frighten” or
cause “terror” in the bad seed so as to dissuade the bad seed from filing the
lawsuit. The reason this is so important
is that lawsuits frequently deplete the estate for every other beneficiary of
the estate.
In Stewart v. Stewart, et al., a case decided on September 27, 2012,
the Arizona Court of Appeals reversed a trial court that ruled against a
particularly harsh in terrorem clause.
The clause was so harsh that a beneficiary who “cooperates or aids” another in
contesting the will or trust was disinherited. The trial court ruled that such a broad clause
violated the public policy of Arizona because Arizona Revised Statute 14-2517,
along with case law interpreting it, allows for good faith attacks on wills or
trusts, even if unsuccessful.
In reversing the decision, the
Court of Appeals reasoned that the clause only applied to beneficiaries who
“voluntarily cooperate or aid a party to contest” the will or trust. The Court of Appeals further reasoned that a
party that brings the lawsuit with probable cause and in good faith has no
reason to fear the in terrorem clause as current Arizona law supports those
attacks. The Court explained that if a
reasonable person at the time of the challenge would have believed there was a
substantial likelihood of success for a contest or attack, then the in terrorem clause will have no
force.
In making this decision, the Court of Appeals
provided significant support to in
terrorem clauses and, therefore, increased ammunition against bad
seeds. So, do you have a bad seed in
your family? If so, a properly drafted in terrorem clause will aid in limiting the
damage from a lawsuit after you die.
