We have written about Georgia in terrorem provisions before. Almost exactly three years ago, we described a then-recent court case in which two estate beneficiaries asked for authority to file a future action challenging the administration of a probate estate. The personal representative, pointing to the “no contest” (in terrorem) provision in the will, argued that any such filing would be a will challenge and would force disinheritance of the contestants. The Georgia Court of Appeals ruled that it would be impossible to know whether a proposed future lawsuit might violate the will provision, and returned the case to the probate court for further proceedings.
What we didn’t write about then (because it hadn’t yet happened) was the follow-on proceedings. The contestants did file an action, seeking to force an accounting by the personal representative. In a second trip to the Georgia Court of Appeals, resolved earlier this year, the appellate judges permitted the challenge. They reasoned that the lawsuit was about administration of the estate, not the terms of the will itself. In re Estate of Burkhalter, March 9, 2020.
Georgia’s Court of Appeals rules on two new in terrorem cases
Last month, in completely unrelated cases, the same Court of Appeals added two new decisions addressing the law covering Georgia in terrorem provisions. Who could predict that Georgia would be such a hotbed of litigation on this narrow legal issue?
To recap: anyone can include a provision in their will (or, in most states — including Arizona — their trust) that prohibits any legal challenge. Some writers refer to such language as an in terrorem provision; sometimes they are simply called “no-contest” clauses. Typically, they provide that anyone challenging the will or trust is disinherited — the idea being that family feuds won’t end up in probate court that way. State law usually permits such clauses, but if there is a valid reason for the contest the no-contest clause may be unenforceable. That’s the basic law of Georiga — and of Arizona.
Court cases interpreting the in terrorem/no-contest clauses are common. The stakes are high: if a challenge is unjustified, the contestant may lose their entire inheritance. But such a provision is not blanket authority for the personal representative of an estate to misbehave.
The first new case on Georgia in terrrorem provisions
Thomas A. Barry, II, died in 2015, in Blairsville, Georgia (pop: 620). He included such a provision in his will. He had named his son Thomas III as personal representative, and as trustee of his trust. His estate plan included leaving everything equally to his three children: Thomas, Cynthia Barry, and Pamela Berndsen.
Cynthia (who happens to be a lawyer practicing in Florida) immediately began sending emails to her brother, her sister and a niece — all threatening litigation if the estate was not administered to her liking. She contacted two different lawyers in the small town, giving them just enough information about the estate to prevent them from representing anyone else — though she did not retain either firm. Cynthia complained that her brother did not seek admission of their father’s will to probate for several months. She hired a competing appraiser for the father’s home, seeking to set a higher value (so that she would receive more cash from the estate). And she refused to cooperate with Thomas III’s attempts to divide household furnishings or his precious metal collection.
Less than four months after Thomas, II’s death, Cynthia filed a lawsuit against her brother. She complained that he had failed “refused to file the will” and had “refused to provide adequate information” about the estate.
Meanwhile, Thomas had been providing his sister with all the information she demanded. He sought her input on valuations and procedures, even though the will and trust gave him discretion to exercise his own judgment. As a personal representative/trustee should, he kept careful track of estate assets and income, and his attempts to work things out with his sister. He tried to get Cynthia to coordinate distribution of the precious metals, their father’s stock accounts and the personal property.
Did Cynthia’s behavior violate the no-contest clause?
After a hearing, the trial judge decided that Cynthia’s complaints were invalid. It was her actions, not her brother’s, that delayed and impeded the administration of the estate. The trial court ruled that Cynthia had violated the in terrorem provision, and that she should be disinherited.
Cynthia appealed, but the Georgia Court of Appeals was unpersuaded. The appellate judges agreed that her behavior amounted to a challenge to her father’s estate plan, and upheld her disinheritance. If she had sought an accounting from her brother, that might not have triggered the in terrorem provision. But because she obstructed the administration of her father’s estate, acted in bad faith and contested her brother’s administration, the disinheritance was upheld. Barry v. Barry, October 30, 2020.
The second Georgia in terrorem provision decision
Just a few days earlier, the same appellate court (with a different set of judges) addressed a completely unrelated Georgia in terrorem provision. In that case, the legal proceeding was brought by the personal representative — who happened to also be a beneficiary. Would that mean that he was disinerhited?
Jewel Penland’s will, like those of Thomas Barry and Louisa Burkhalter, included a clause prohibiting any contest. If any beneficiary did contest the will or the administration of the estate, they would be disinherited.
Ms. Penland’s 2005 will named her son James and two daughters (Eloise and Dorothy) as co-personal representatives, to act together. That will left some specific dollar amounts to several people, and the residue to be divided equally among James, Eloise and Dorothy. In 2006 she signed a codicil, which removed Eloise as a residuary beneficiary and replaced her with her son Samuel. It did not change the personal representatives or any of the dollar amounts going to other beneficiaries.
After Ms. Penland’s death in 2007, Dorothy filed the 2005 will for probate — but she did not file the 2006 codicil. James and Eloise filed an objection, seeking the admission of the codicil, as well. That resulted in a decade’s worth of litigation. Early in the dispute, though, Dorothy asked the court to direct distribution of the dollar amounts left to individuals. James objected, saying that a provision of the will requiring equalization for items passing outside the will needed to be calculated. Ultimately, the probate court ruled that the equalization provision did not apply to the individual beneficiaries, and directed distribution of their dollar amounts.
Years later the codicil was admitted to probate. James asked the court to disinherit Dorothy and Samuel, saying their objection to the codicil triggered the in terrorem provision. Dorothy responded by asking to disinherit James over his failure to agree to distributions to the named beneficiaries. The probate court agreed, and disinherited all three. That meant that Eloise and grandchildren would share the estate, apparently.
Did James’s behavior violate the no-contest clause?
Dorothy also appealed her disinheritance, but dismissed her appeal before the court could address the issue. The Court of Appeals then reversed the disinheritance of James.
Why did Dorothy’s (and Samuel’s) behavior trigger the in terrorem provision, while James’s did not? Because James filed his actions not as a beneficiary but as a co-personal representative. The actual language of Ms. Penland’s in terrorem clause was addressed only to beneficiaries who challenged the validity of her will or its provisions. It’s a little bit unclear from the decision, but it appears that her entire estate will now go to James. In re Estate of Penland, October 26, 2020.
Are there takeaways for those of us not living in Georgia?
Yes, there are. Here are a few:
- No-contest or in terrorem clauses may not be effective in reducing litigation. Of course we don’t know about all of the contests that were avoided by inclusion of such language, but they sometimes seem to foment, rather than discourage, litigation.
- Even if you do include an in terrorem provision in your will or trust, it may not be effective if someone — including a beneficiary — files a valid contest.
- Apparently, even people who are leaving their estates to their children in equal shares may sometimes choose to include no-contest provisions. Sometimes it might make more sense to look to mandatory dispute resolution provisions as a possible way to minimize litigation.
- Tolstoy’s maxim (from Anna KareninaI) may be accurate: “All happy families are alike; each unhappy family is unhappy in its own way.”