What a No-Contest Clause Does
A no-contest clause (sometimes called an in terrorem clause) is a provision in a trust that says: if a beneficiary challenges the trust, that person forfeits their share. The idea is to discourage frivolous disputes by making the stakes high enough to think twice before filing.
Many trust creators include these clauses to protect their wishes from being overturned. They can be effective at preventing baseless challenges. But the law draws a clear line to protect contesting beneficiaries who have real concerns.
A provision in a trust instrument that purports to penalize an interested person for contesting the trust instrument or instituting other proceedings or actions relating to the trust property is unenforceable if probable cause exists for the contest, proceedings or actions.
A.R.S. § 14-10113The Probable Cause Standard
The law does not allow no-contest clauses to silence legitimate concerns. If a beneficiary has probable cause to believe something is wrong, the penalty clause cannot be used against them. Case law in this area looks at whether a person properly informed and advised would have reason to bring the challenge.
Probable cause means there is a substantial likelihood that the challenge has merit. It means the person had evidence which would lead a reasonable person to conclude that the contest was justified. The beneficiary does not need to win the case. They just need a reasonable basis for bringing it.
This protects beneficiaries who suspect undue influence, fraud, or a trustee who is not following the trust terms. A beneficiary should not have to choose between raising a genuine concern and losing their inheritance. The law ensures they do not have to make that choice, as long as they are properly informed and advised to conclude the challenge has a reasonable basis.
For trust creators, a no-contest clause still carries weight against meritless challenges. But it will not shield a trust from scrutiny when real problems exist in trust administration. Working with experienced counsel to draft clear, unambiguous trust language remains the best way to minimize disputes.
For families, the takeaway is that no-contest clauses are not absolute. If you believe a trust has been improperly influenced or the trustee is mismanaging assets, the law preserves your right to ask questions. The probable cause standard balances the trust creator's desire for peace with the beneficiaries' need for accountability.