Ard v. Hudson, No. 02-13-00198-CV, 2015 WL 4967045 (Tex. App.—Fort Worth Aug. 20, 2015, pet. abated).


In Terrorem Provision


Testatrix’s will contained the following in terrorem provision:


If any beneficiary hereunder shall contest the probate or validity of this Will or any provision thereof, or shall institute or join in (except as a party defendant) any proceeding to contest the validity of this Will or to prevent any provision thereof from being carried out in accordance with its terms (regardless of whether or not such proceedings are instituted in good faith and with probable cause), then all benefits provided for such beneficiary are revoked and such benefits shall pass to the non-contesting residuary beneficiaries of this Will in the proportion that the share of each such non-contesting residuary beneficiary bears to the aggregate of the effective (non-contesting) shares of the residuary.... Each benefit conferred herein is made on the condition precedent that the beneficiary shall accept and agree to all provisions of this Will.


One of the beneficiaries, Mary, brought suit against the executors and trustees for breach of duty, sought temporary and permanent injunctive relief, and requested the appointment of a receiver. The fiduciaries claimed these actions triggered forfeiture of her benefits under the will. The trial court agreed and Mary appealed.


The appellate court reversed. The court held that “a beneficiary has an inherent right to challenge the actions of a fiduciary and does not trigger a forfeiture clause by doing so.” Id. at *8. The court continued by explaining that this right would be “worthless” if the beneficiary could not seek remedies. According, the court also held that “a beneficiary exercising his or her inherent right to challenge a fiduciary may seek injunctive and other relief, including the appointment of a receiver, from the trial court to protect what the testator or grantor intended the beneficiary to have without triggering the forfeiture clause.” Id.


The court then turned its attention to the last line of the in terrorem clause which imposes a condition precedent on being a beneficiary, that is, to “accept and agree” to the will provisions. Consistent with its holding on the forfeiture part of the clause, the court stated that Mary’s actions did not violate the condition precedent. Mary’s challenges are to the conduct of the fiduciaries, not the terms of the will.


Moral:  In terrorem clauses are enforceable if a beneficiary attempts to change the testator’s dispositive plan. They are not effective to protect executors and other fiduciaries from claims of breach of fiduciary duty.