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In Terrorem Clauses:
Despite its name, an in terrorem clause does not refer to clauses in Wills drawn for terrorists. Rather it is a clause that is intended as a mere threat to a beneficiary. For example, supposing you are concerned that someone will challenge your Will in court. Can you put a clause in your Will that says that anyone who starts a lawsuit about your Will forfeits his or her inheritance? Would such a clause stand up in court?
There are two reasons why a court in British Columbia is not likely to enforce a clause providing that anyone who challenges a Will forfeits his or her inheritance. First, the courts have not upheld clauses that are idle threats, intended to coerce a beneficiary. Secondly, in some cases our courts have said that these clauses offend public policy.
It is possible to avoid the first objection that a clause providing that a beneficiary who challenges the Will forfeits his inheritance is an idle threat. If the Will goes on to provide that the gift that would have gone to a beneficiary who challenges the Will, shall go to some other person if the beneficiary sues, then arguably the clause is not an idle threat.
However, even if the clause is drawn with a gift over to another person if the beneficiary challenges the Will, the clause may offend public policy.
The Supreme Court of British Columbia has refused to enforce a clause providing that a beneficiary forfeits his inheritance in cases where a child or spouse of the deceased has applied to court for a greater share of the deceased’s estate under the Wills Variation Act, RSBC 1996 Chapter 490. The Wills Variation Act allows a spouse or child to apply to court to vary a will on the grounds that the deceased did not make adequate provision for the child or spouse. In Bellinger v. Fayers, 2003 BCSC 563, (2003) 13 B.C.L.R. (4th) 348, the court said that it was a matter of public policy that support and maintenance be provided for spouses and children, and it would be against public policy to allow someone to circumvent that policy by putting in a clause providing for forfeiture of a gift if a Wills Variation Act claim is made.
The court in Bellinger did not rule out the possibility that a court could enforce a clause providing for forfeiture of a gift if the beneficiary challenges the Will on some grounds other than the Wills Variation Act (and there is a gift over to another person). For example, a beneficiary might challenge the Will on the basis that the deceased was mentally incompetent when he made the Will.
However, putting a clause in a Will providing for forfeiture of a gift if a beneficiary challenges the Will is probably not an effective strategy for reducing the risk of a lawsuit. It is quite proper to bring disputes about Wills to court for determination, and our courts may be reluctant to enforce clauses in Wills that are intended to prevent someone with a claim from having his or her day in court.
In British Columbia, the court usually requires an unsuccessful party to pay costs to the successful party. Although costs generally represent only a portion of each party’s actual legal costs, the prospect of having to pay the other party’s costs does discourage claims that are without merit.
If the prospect of having to pay the other party’s costs if a claim is unsuccessful does not discourage a lawsuit, a clause providing in a Will providing for forfeiture of a gift is not likely to be any more effective in avoiding a lawsuit by a beneficiary who feels aggrieved.
Despite its name, an in terrorem clause does not refer to clauses in Wills drawn for terrorists. Rather it is a clause that is intended as a mere threat to a beneficiary. For example, supposing you are concerned that someone will challenge your Will in court. Can you put a clause in your Will that says that anyone who starts a lawsuit about your Will forfeits his or her inheritance? Would such a clause stand up in court?
There are two reasons why a court in British Columbia is not likely to enforce a clause providing that anyone who challenges a Will forfeits his or her inheritance. First, the courts have not upheld clauses that are idle threats, intended to coerce a beneficiary. Secondly, in some cases our courts have said that these clauses offend public policy.
It is possible to avoid the first objection that a clause providing that a beneficiary who challenges the Will forfeits his inheritance is an idle threat. If the Will goes on to provide that the gift that would have gone to a beneficiary who challenges the Will, shall go to some other person if the beneficiary sues, then arguably the clause is not an idle threat.
However, even if the clause is drawn with a gift over to another person if the beneficiary challenges the Will, the clause may offend public policy.
The Supreme Court of British Columbia has refused to enforce a clause providing that a beneficiary forfeits his inheritance in cases where a child or spouse of the deceased has applied to court for a greater share of the deceased’s estate under the Wills Variation Act, RSBC 1996 Chapter 490. The Wills Variation Act allows a spouse or child to apply to court to vary a will on the grounds that the deceased did not make adequate provision for the child or spouse. In Bellinger v. Fayers, 2003 BCSC 563, (2003) 13 B.C.L.R. (4th) 348, the court said that it was a matter of public policy that support and maintenance be provided for spouses and children, and it would be against public policy to allow someone to circumvent that policy by putting in a clause providing for forfeiture of a gift if a Wills Variation Act claim is made.
The court in Bellinger did not rule out the possibility that a court could enforce a clause providing for forfeiture of a gift if the beneficiary challenges the Will on some grounds other than the Wills Variation Act (and there is a gift over to another person). For example, a beneficiary might challenge the Will on the basis that the deceased was mentally incompetent when he made the Will.
However, putting a clause in a Will providing for forfeiture of a gift if a beneficiary challenges the Will is probably not an effective strategy for reducing the risk of a lawsuit. It is quite proper to bring disputes about Wills to court for determination, and our courts may be reluctant to enforce clauses in Wills that are intended to prevent someone with a claim from having his or her day in court.
In British Columbia, the court usually requires an unsuccessful party to pay costs to the successful party. Although costs generally represent only a portion of each party’s actual legal costs, the prospect of having to pay the other party’s costs does discourage claims that are without merit.
If the prospect of having to pay the other party’s costs if a claim is unsuccessful does not discourage a lawsuit, a clause providing in a Will providing for forfeiture of a gift is not likely to be any more effective in avoiding a lawsuit by a beneficiary who feels aggrieved.
1 comment:
Excellent, Stan. Give me some time and I will study its contants when I have some more time. In the mean time: Good luck, many readers and more clients.
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