Georgia Supreme Court: In Terrorem Clause Does Not Result In Forfeiture In Successful Will Or Trust Contest
In Slosberg v. Giller, a June 30, 2022 opinion from the Georgia Supreme Court, the Court determined that an in terrorem or no contest clause does not result in forfeiture when the will or trust is invalid.
The Facts of Slosberg v. Giller
David Slosberg executed a trust which said that if his son, Robert, or daughters, Suzanne and Lynne, challenged the trust, they would forfeit any benefits they were to receive from it. David challenged the validity of the trust on the ground of undue influence committed by his sisters.
The in terrorem clause in the trust stated:
[S]hould [Plaintiff], or his legal representative, or [Defendants], or their legal representatives[,] contest or initiate legal proceedings to contest the validity of this Trust or my Last Will and Testament . . . , or any provision from being carried out in accordance with its terms as I expressed (whether or not in good faith and with probable cause), then all the benefits provided herein for [Plaintiff] and/or for [Defendants] are revoked and annulled.
Ultimately, a Georgia jury agreed that Defendants unduly influenced David to create the trust. The trial court entered an order declaring that the trust was void.
Defendants filed a motion notwithstanding the verdict, arguing, among other things, that the in terrorem clause contained in the trust instrument precluded Plaintiff from asserting the undue-influence claim in the first place. The trial court denied the motion, but the Court of Appeals reversed, holding that the in terrorem clause barred Plaintiff’s claim and resulted in his forfeiture of any benefits from the trust.
The Georgia Supreme Court granted Plaintiff’s petition for certiorari to address whether the Court of Appeals correctly concluded that the in terrorem clause in this case barred Plaintiff’s undue-influence claim and resulted in his forfeiture of benefits conferred by his father, David’s, trust.
What Is an In Terrorem No Contest Clause In a Georgia Will or Trust?
Georgia law allows a testator or settlor to “guard a will or trust against attack” by including an in terrorem clause, which ordinarily provides that in the event a beneficiary challenges the will or trust, he will be disinherited. Read No Contest Clauses In Georgia Wills and Trusts.
The Georgia Supreme Court examined both Georgia statutory law and common law principles regarding in terrorem clauses.
Georgia Statutory Law Regarding In Terrorem No Contest Clauses
The Georgia Supreme Court stated:
This principle, though well established, has not been expressly codified in Georgia law. Indeed, only two provisions in the version of the Georgia Code that was in effect when David created the trust—OCGA § 53-12-22 (b) in the Trust Code and OCGA § 53-4-68 (b) in the Probate Code—even mentioned in terrorem clauses. Specifically, former OCGA § 53-12-22 (b), which applies to the trust in this case, said: A condition in terrorem shall be void unless there is a direction in the trust instrument as to the disposition of the property if the condition in terrorem is violated, in which event the direction in the trust instrument shall be carried out.
Even though former OCGA § 53-12-22 (b) established this single statutory requirement—direction in the trust instrument for disposition of the forfeited property—that would void an in terrorem clause if not satisfied, neither that provision nor any other provision contained in the former (or current) Georgia Code indicates that an in terrorem clause is automatically valid and enforceable if that single condition is satisfied. For a broader view of how in terrorem clauses operate within trust instruments, we now turn to the longstanding legal principles about trusts that form the backdrop against which former OCGA § 53-12-22 (b) was enacted.
Georgia Common Law Rule Generally Allows Challenges to a Legal Instrument on the Ground It is Not Valid
The Georgia common law adds a layer of analysis onto the statutory law that the appellate court ignored.
When an in terrorem clause that is valid under Georgia statutory law is included in a trust instrument, the clause ordinarily will disinherit a beneficiary who challenges the trust. But a predicate for the in terrorem clause’s operation is the valid formation of the legal instrument in which the clause is embedded. On this latter point, Georgia courts have long applied the common-law rule that the valid formation of a trust instrument, will, or contract may be challenged. Such challenges include, for example, lack of capacity, duress, fraud, and undue influence—the claim at issue here. Read How to Contest a Will In Georgia.
In other words, a finding that an entire trust, will, or contract was procured by undue influence nullifies each and every provision in that document, regardless of the type of provision.
If an Entire Trust Is Procured By Undue Influence the Trust – And All of Its Provisions – Are Invalid and Void
The general rule in Georgia is that if an entire legal instrument such as a trust is determined to have been procured by undue influence, that legal instrument—including all of the provisions contained in it—is invalid and thus void. Under such circumstances, the in terrorem clause contained in the trust instrument—along with all other provisions of the instrument—would be invalid, and the null in terrorem clause could not effect a forfeiture:
The Court of Appeals majority opinion held, and Defendants argue, that the in terrorem clause in David’s trust barred Plaintiff from asserting his undue-influence claim in the first place and resulted in his forfeiture of trust assets. But that conclusion is incorrect, because as we explained above, it is well established under Georgia law that an in terrorem clause does not bar a challenge to the valid formation of a legal instrument such as a trust or will. Nor does such a clause result in forfeiture when a beneficiary successfully voids a trust or will.
Here, Plaintiff raised an undue-influence claim to challenge the validity of the trust instrument—which included the in terrorem clause contained in it. The trial court properly permitted Plaintiff’s undue-influence claim to proceed to the jury, and when the jury determined that the trust was procured by undue influence, the trust and its in terrorem clause were rendered void and without effect. Because Plaintiff’s undue-influence claim was successful, the void in terrorem clause did not result in his forfeiture of benefits from the trust.