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