In a recent Massachusetts Appeals Court decision, Capobianco v. Dischino, 98 Mass. App. Ct. 1101 (July 9, 2020), the Court upheld the enforceability of no-contest clauses in Massachusetts wills and trusts. The Court affirmed the Suffolk Probate and Family Court’s judgment holding that a trust beneficiary forfeited his interest in the trust at issue when he filed a complaint seeking to remove the trustees, appoint himself as the sole trustee, stop the trustees from depleting trust assets, and request a trust accounting.
The trust in Capobianco v. Dischino contained a “no-contest” clause providing that any beneficiary who challenges the terms of the trust in court will forfeit his or her interest in the trust. No-contest clauses are enforceable in the vast majority of states, but varying considerations and tests will be carefully considered in each jurisdiction. For example, a court will often enforce a no-contest clause when a beneficiary challenges the validity of the instrument itself or its substantive provisions. In contrast, courts often decline to enforce a no-contest clause when a beneficiary is seeking an interpretation of the will or trust, a rightful accounting, or court supervision of various administrative tasks. The reason the courts likely will not enforce clauses in such examples is because the party bringing suit is seeking court guidance or intervention to ensure the trust or estate is being administered properly, versus trying to disturb, challenge, or change the provisions of the instrument.
In this case, the beneficiary was unhappy with the way the trustees were handling their duties. Rather than bringing an action for breach of fiduciary duty and seeking to remove the trustees in accordance with the trust terms, he filed suit asking the probate court to disregard multiple terms of the trust, name him as the sole trustee, appoint him as the sole manager of the two LLCs controlled by the trust, and prevent the current trustees from administering the trust while the litigation was pending. The Massachusetts Appeals Court affirmed the Probate Court’s decision that the trust beneficiary triggered the no-contest clause with his lawsuit because he sought to disregard the provisions of the trust governing the process for how trustees are appointed and the identity of the successor trustees. This was true even though the Court found that the trustees lacked standing to bring a declaratory judgment to enforce the no-contest clause, because they had no “personal interests” in the matter while serving as trustees.
In conclusion, it is important to be cautious when considering litigation over a will or trust that contains a no-contest clause. The risk of enforcement is much lower when the litigation isn’t intended to obtain a result that is inconsistent with the instrument at issue. If you anticipate any family discord over your estate plan, you may wish to include a no-contest clause in both your will and trust.
Please contact your attorneys in the Private Client Group at Casner & Edwards to revise or prepare your estate plan today to address your needs.