No-contest clauses (sometimes called in terrorem clauses) are extremely common in today’s litigious society. A no-contest clause essentially makes all gifts under the will or trust conditional upon not challenging the document. Many clients are concerned about a beneficiary (or a disinherited heir) contesting their estate planning documents, especially if the client wants to hold a beneficiary’s assets in trust or restrict or cut off a potential beneficiary’s idea of what they might inherit. In my practice, clients are asking for them much more frequently than when I first began doing estate planning in 1990. This is particularly true with blended families where there may be a greater potential for disagreement among the various beneficiaries or between those who are favored by the plan and those who feel they were wronged by the dispositive terms. Trust and estate litigation is frequently driven by emotion, and many times the beneficiary’s complaints are not rational, thereby leading to protracted litigation and waste of the trust or estate’s assets. This is what the settlor is typically trying to avoid by the use of a co-contest clause.
The Wyoming Supreme Court recently held in EGW and AW v. First Federal Savings Bank of Sheridan, 413 P.3d 106 (Wyo. 2018) that a no-contest does not violate public policy in Wyoming. The Court states that a “testator has the right to grant bequests subject to any lawful conditions he or she may select.” Id. at 112. In fact, the Wyoming Supreme Court in its opinion quotes from In re Goist’s Estate, 18 N.W. 2d, 513, 521, 522, as follows:
No right of the citizen is more valued than the power to dispose of his property by will. No right is more solemnly assured to him by the law. Nor does it depend in any sense upon the judicious exercise of that right. It rarely happens that a man bequeaths his estate to the entire satisfaction of either his family or friends. The law wisely secures equality of distribution where a man dies intestate, but the very object of a will is to produce inequality . . . In this country, a man’s prejudices form a part of his liberty. He has a right to them. He may be unjust to his children or relatives. He is entitled to the control of his property while living, and by will to direct its use after his death, subject only to such restrictions as are imposed by law.
EGW and AW v. First Federal Savings Bank of Sheridan, 413 P.3d 106, 110 (Wyo. 2018)
The Court even rejected the argument that no-contest clauses are not enforceable when there is a challenge made in good faith with probable cause. The probable cause exception related to no-contest clauses comes into play when the beneficiary has what the court considers to be an appropriate justification for challenging a term or terms of the document. This is still risky for the beneficiary, however, because it is often difficult to know going into the litigation whether or not the reason for challenge will actually be determined by the court to constitute probable cause. Many states allow challenges made with probable cause to be brought in spite of a no-contest clause, a principal that is set forth in § 3-905 of the Uniform Probate Code. However, as the Wyoming Supreme Court notes in its recent decision, the Wyoming legislature did not adopt Section 3-905 of the Uniform Probate Code and the Court clearly states that no-contest clauses may be upheld without the probable cause exception in Wyoming.
