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Wednesday, August 25, 2010

If you contest my Will, you get nothing!

Something that appears to have grown in popularity over the last few years is a clause in a Will that says if a beneficiary contests the Will, they get nothing. The beneficiary would forfeit the gift that was already left to them in the Will. Clearly this is intended to put a lid on someone that the testator expects will be unhappy with his or her share of the estate. When a client asks me to put this type of clause in his or her Will, the client always asks, "will it work?". If only the answer were as simple as yes or no!

Let's take a closer look at what these clauses are all about.

When a client asks me whether a clause restricting a beneficiary's ability to contest the Will "will work", he or she is really asking whether the clause is legally valid. In law, the question comes down to whether or not the clause is a threat. (The latin name for this type of clause is in terrorem, which means "in fear"). A threat would not be legally valid, so on the face of it, this type of clause would seem to be invalid.

So how do you prevent the clause from being a threat? One of the keys to it is to include what is known as a "gift over". This means giving the gift that the beneficiary would have received to someone else if the first beneficiary contests the Will. In other words, your Will might say that you leave $10,000 to your son Ralph. It would then say that if Ralph contested your Will to get a larger share, Ralph's share would go to your other son, Edward.

Note that you CANNOT use this type of clause against someone who is your legal dependent. A dependent is your spouse (married or common law), your minor children, and your adult children who are handicapped to the extent that they cannot earn a living. These clauses simply have no effect against those with a legal right to apply for a greater share of your estate. You could only use the clause against a beneficiary that you chose to give something to. This includes your adult children, unless they are handicapped.

I've read a number of cases about in terrorem clauses and despite the court's attempts to formulate a clear rule, the cases seem to be very dependent on specific circumstances, including whether the gift under discussion is real property or personal property. Clauses that are held not to be threats are sometimes held as invalid for other reasons (usually for being against public policy). So it's impossible to say either that the clause always works or that it never works.

It's interesting to note that in the USA, these clauses are being held as valid in several states. No doubt it's the American influence on us Canadians that is causing the upswing in requests for these clauses here, even though our courts' approach is very different.

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