An in terrorem clause, commonly found in wills and trusts, is a legal provision designed to deter beneficiaries from challenging the validity of the document or taking legal action against the estate. Also known as a no-contest clause, it threatens forfeiture of inheritances if a legal challenge is initiated. The clause aims to promote the testator’s intent, discourage unnecessary litigation, and maintain the integrity of the estate plan. While in terrorem clauses in New York wills and trusts are permitted, they are very narrowly construed.
Matter of Follman 2023 NY Slip Op 23292 involves a request for the construction of articles within three separate inter vivos trusts established by the decedent and his wife, Esther Follman. The petitioner, Ahron N. Follman, seeks a ruling that filing a petition for information and/or accountings will not trigger the in terrorem clauses in these trusts. Respondent Avraham Follman opposes the motion, asserting that the in terrorem clauses have already been triggered. This blog explores the background facts, the legal issue at hand, the court’s holding, and provides a comprehensive discussion of the case.
Background Facts
The decedent and his wife created trusts in 1996 and 2011, involving all five of their children as named trustees and beneficiaries. These trusts held interests in various LLCs with income-producing properties. In 2016 and 2017, new trusts were established, favoring Avraham and his children over the other siblings. Ahron alleges improper transfers of assets from the earlier trusts to the 2017 trusts, citing undue influence and misuse of power of attorney by Avraham. The decedent passed away in 2018, followed by Esther in 2021.
Issue
The primary issue revolves around the interpretation of in terrorem clauses within the 2011 and 2017 trusts. Ahron seeks a summary judgment that filing a petition for information and accountings will not trigger these clauses, while Avraham contends that they have already been activated.
Holding
The court denies Ahron’s motion for summary judgment and grants Avraham’s cross-motion to dismiss the petition. The court refuses to offer legal advice on whether the in terrorem clauses would be triggered, stating that the proposed petition appears more as a request for advice on drafting a pleading than seeking an opinion on a discrete issue. The court emphasizes that considering legal action cannot be a basis for triggering an in terrorem clause, and there is no justification for the imposition of counsel fees.
Discussion
In terrorem clauses, although not favored, are enforceable, with the court’s primary goal being to carry out the testator’s intent. The language of the in terrorem clauses in the 2011 and 2017 trusts is clear and unambiguous. However, the court highlights the need to consider the problematic nature of the clause concerning the “administration” of the trusts.
Ahron’s argument that the proposed petition seeks information and not opposition to specific provisions is scrutinized. The court distinguishes between SCPA 2102 and SCPA 2103 proceedings, noting that the latter, seeking an inquiry under SCPA 2103, typically transitions into turnover proceedings after an initial inquiry. The court declines to provide legal advice on the potential success of various legal strategies within the proposed petition.
The court dismisses the petition, stating that it is not obligated to offer opinions on the propriety of legal stratagems. It emphasizes that a construction proceeding is appropriate for determining if conduct violates an in terrorem clause, but the current application appears more as a request for advice on drafting.
Conclusion
The court’s decision underscores the complexity of in terrorem clauses and the need for precise legal strategies. The denial of Ahron’s motion and the grant of Avraham’s cross-motion emphasize the court’s reluctance to offer preemptive legal advice on the potential triggering of in terrorem clauses. This case serves as a reminder of the nuanced nature of trust constructions and the importance of careful legal considerations in estate planning. When it comes to interpretation of trust provisions and challenging them, it’s critical to contact an experienced New York trust attorney.