I am often asked to include in a will or trust a provision that states something along the lines of “If any beneficiary contests the provisions of this document, the beneficiary will receive $1 in lieu of their share of the estate.” The theory is that the provision will prevent or discourage frivolous litigation. The provisions are called “forfeiture” or “will contest” provisions and in my view, create more litigation than they prevent. This is because there is an Arizona statute for wills which states that any forfeiture provision is unenforceable if probable cause for the action exists. A.R.S. §14-2517. And while the statute only applies to wills, Courts consistently apply the same principle to trust provisions. Thus, litigants spend time, energy and money fighting about whether there are sufficient facts to establish probable cause for each claim.
A 2015 Arizona case illustrates the point. In re Shaheen Trust, 341 P.3d 1169 (Ariz.Ct.App. 2015) involves beneficiaries who brought suit against the trustee for multiple breaches of the trust. The trial court dismissed the claims, but choose not to apply the forfeiture provision because probable cause existed for some of their claims. The trustee appealed the decision and the appellate court reversed, stating that the probable cause principle making the provision unenforceable did not apply because the beneficiaries did not have probable cause for all their claims. So in this case, the beneficiaries sought to protect themselves from perceived slights by the trustee and because they overstated their position during the litigation, they will potentially receive less than what the drafter wanted them to receive.
In the above case, the forfeiture provision did not prevent the litigation. And instead of the litigation being over with the trial court determination, the parties spent further funds on appeal in an attempt to determine whether some or all of the claims had probable cause. Finally, the drafter’s intended beneficiaries may now receive nothing because they included too many claims in the lawsuit. Clearly a bad result. While we can not be sure of what would have happened if the trust document did not contain a forfeiture provision, it is safe to say that one aspect of the case and an appeal would not have taken place and the drafter’s intended beneficiaries would have received their share.