Article on the In Terrorem Clause and the Good Faith and Probable Cause Exception

In terrorem clauses, also known as no-contest clauses, have long been used in wills and trusts to help preserve and protect testamentary dispositions of property. When interpreting and applying in terrorem clauses in wills and trusts, Texas courts have used various approaches, and Texas case law dealing with in terrorem clauses has in no way been uniform. In 2009, the Texas Legislature took on the task of weighing the various interests affected by the enforcement of in terrorem clauses located in wills and trusts and attempted to provide a comprehensive balance among Texas’s competing public policies. The Texas Legislature passed H.B. 1969 with the ambitious intent of “clarify[ing] existing law” in this area by enacting statutes that are applicable to both wills and trusts. In sum, these statutes provide that an in terrorem clause is unenforceable as to a beneficiary who contests a will or trust in good faith and upon probable cause. Most recently, the 82nd Legislature tweaked these statutes by replacing “probable cause” with “just cause.” The legislature has indicated that this change is “nonsubstantive.” Because the language in H.B. 1969 is entirely new to Texas precedent interpreting will contests, this article will analyze the language as it existed before the amendments and assume that the analyses will apply equally to the “just cause” language.

As this article will reveal, the legislature’s failure to elaborate on the limited language used to codify this exception leaves several questions open to interpretation by Texas courts. Other than making it clear that Texas now recognizes a form of the “good faith and probable cause” exception, the statutes do little to “clarify” this previously murky area of Texas law. While Texas courts have yet to construe this new legislation, this article will identify the different possible interpretations of these statutes, discuss the potential impact of these statutes on testators, settlors, and beneficiaries in Texas, and then briefly address what, if any, impact the 2011 amendments have upon the application of this legislation.