Forfeiture Clauses In Texas Will and Trust Contests

A forfeiture clause (also called a “no contest clause” or “in terrorem clause”) in a Texas will or trust is a clause that voids a devise in favor of a person for bringing any court action, including contesting the will or trust.  Said another way, a forfeiture clause conditions a bequest on a beneficiary not disrupting the will or trust.

The majority of states permit forfeiture clauses, although at least two states, Florida and Indiana, do not.

Forfeiture Clauses In Texas Wills

Section 254.005 of the Texas Estates Code governs forfeiture clauses in wills and states:

(a)  A provision in a will that would cause a forfeiture of or void a devise or provision in favor of a person for bringing any court action, including contesting a will, is enforceable unless in a court action determining whether the forfeiture clause should be enforced, the person who brought the action contrary to the forfeiture clause establishes by a preponderance of the evidence that:

(1)  just cause existed for bringing the action; and

(2)  the action was brought and maintained in good faith.

(b)  This section is not intended to and does not repeal any law recognizing that forfeiture clauses generally will not be construed to prevent a beneficiary from seeking to compel a fiduciary to perform the fiduciary’s duties, seeking redress against a fiduciary for a breach of the fiduciary’s duties, or seeking a judicial construction of a will or trust.

Forfeiture Clauses in Texas Trusts

Section 112.038 of the Texas Property Code addresses forfeiture clauses in trusts and mirrors the statute applicable to wills.

What Is The Purpose of A Forfeiture Clause?

The most common purpose of a forfeiture clause is to prevent will and contest litigation.  The person who is considering a will contest will have to think long and hard about whether they want to risk losing the bequest they get in the will in order to challenge the will.

When Is A Forfeiture Clause Violated In Texas?

There are several consistent rules applied by Texas courts to determine if a forfeiture clause has been violated.

First, “[i]f the intention of a suit is to thwart the settlor’s intention, the in terrorem clause should be enforced.”  Di Portanova v. Monroe, 40 S.W.3d 711 (Tex. App. – Houston [1^st Dist.] 2012).

Second, a “violation of the in terrorem clause will be found only when the acts of the parties clearly fall within its express terms.”  Id.  Forfeiture clauses are narrowly construed by the Texas courts.

Texas courts have determined that the following suits do not trigger forfeitures:

1. to recover an interest in devised property;
2. to compel an executor to perform duties;
3. to ascertain a beneficiary’s interest under a will;
4. to compel the probate of a will;
5. to recover damages for conversion of estate assets;
6. to construe a will’s provisions;
7. to request an estate accounting or distribution;
8. to contest a deed conveying a beneficiary’s interest;
9. to determine the effect of a settlement;
10. to challenge an executor appointment;
11. to seek redress from executors who breach fiduciary duties; and
12. presenting testimony in a will contest brought by other beneficiaries.

For an in depth analysis, read the “Fine Art of Intimidating Disgruntled Beneficiaries with In Terrorem Clauses, The” by Gerry W. Beyer, et. al.

What Are The Exceptions to Forfeiture Clauses In Texas?

Under Texas law, a suit brought with “just cause” or brought and maintained in “good faith” will not trigger the forfeiture clause.  The person who brought the suit must prove these grounds by a preponderance of the evidence.

In In the Estate of Cole, the Texas court of appeals stated:

However, for good faith and [just] cause to be an issue, there must necessarily have been a contest contrary to the provision of the [forfeiture] clause.” In re Estate of Newbill, 781 S.W.2d 727, 730 (Tex. App.—Amarillo 1989, no writ). We must first determine if the forfeiture clause was triggered and if so, we then determine whether the triggering event was brought with just cause and maintained in good faith.

Forfeiture Clause Enforced When Party Ratifies Will Contest

In In re Estate of Hamill, 866 SW 2d 339 (Tex. App. – Amarillo 1993) the Texas Appeals court upheld a forfeiture clause. The testator included a forfeiture clause that ordered the disinheritance of any beneficiary who initiated an attack on the will.  The no-contest clause stated:

If any beneficiary hereunder shall contest the probate or validity of this Will or any provisions hereof, or shall be a party (except as a party defendant) to such a contest proceedings, regardless of whether such proceeding is instituted in good faith and with probable cause, such beneficiary and all of his or her issue shall be deemed for all purposes hereunder to have predeceased me, . . . .

The appeals court held that a party who appealed a judgment refusing her Texas will contest forfeited her bequest under the will pursuant to the forfeiture clause, stating:

Additionally, as we pointed out above, the record shows that Jane, as an adult, pursued an appeal from the trial court judgment refusing her contest. Thus, even if the original action brought by Elois on Jane’s behalf did not trigger the no-contest clause, Jane’s subsequent appeal of the trial court’s judgment was clearly a violation of the provision. Parenthetically, in our opinion affirming the trial court’s judgment, this court noted that Jane had attained her majority and was pursuing the appeal as the sole contesting party. Hamill v. Brashear, 513 S.W.2d 602, 605 (Tex.Civ.App.–Amarillo 1974, writ ref’d [**11]  n.r.e.). By filing the appeal, Jane, in effect, adopted or ratified the will contest brought in the trial court. As a result, we must hold that Jane forfeited her bequest under the will pursuant to the no-contest clause.

Does A Suit To Judicially Modify A Trust Trigger a Forfeiture Clause?

No, if modification is not specifically prohibited by the testator and does not defeat the testator’s intent.  In Di Portanova v. Monroe, a suit was filed pursuant to section 112.038 of the Texas Property Code for the judicial modification of the administrative terms of a trust.  The Texas appeals court determined that the action was not an action to thwart the testator’s intent.

First, no provision in the wills nor the trusts the wills created forbid consolidation of the trusts (the relief requested).   In addition, the changes were not prohibited in the will, did not defeat the testator’s intent, and would actually further the purposes of the trust.  The court noted, however, that any modification must conform as nearly as possible to the probable intent of the settlor.  The court stated:

The overarching purpose of all of these trusts is to “provide for the needs of the current income beneficiary, Ugo.” This suit for modification of administrative, nondispositive terms of the trust, pursuant to section 112.054(a)(3), cannot violate the Cullens’ intent because the purpose of the suit to consolidate them is “to prevent waste or avoid impairment of the trust’s administration”—the very intent expressed in the trusts themselves.

Forfeiture clauses in Texas wills and trusts are strictly construed, and rarely enforced.  However, if you are considering contesting a will or trust that contains a forfeiture clause, make sure you study the language and are bringing your action with just cause and in good faith.