Contender, Ready?

What are the rules around the enforceability of no-contest clauses in Wills?

A no-contest clause, also known as a forfeiture clause, is a provision that is often added to Wills with the aim of discouraging any claims against the estate. A no-contest clause states that, if a beneficiary of the Will challenges the Will or brings a claim against the estate, they will forfeit all of their rights under the Will, including their right to receive the inheritance provided for them.

Typically, if someone is unhappy with the terms of a Will and contests it unsuccessfully, then they will still benefit from the Will as drafted. In other words, they will still receive the provision originally made for them even though they have not been successful in winning more from the estate. A no-contest clause changes that dynamic as the challenging beneficiary stands to lose everything if they fail in their claim and the clause is upheld; There is therefore a tremendous amount of pressure on beneficiaries to be sure that if they do bring a claim, it will succeed.

Nathan -v- Leonard

The leading authority on no-contest clauses is Nathan v Leonard [2002]. In fact, the case concerned an ineffective no-contest clause but, nonetheless, provided useful commentary and clarification for legal professionals.

Principally, Nathan v Leonard affirmed the validity of no-contest clauses and held that they are not contrary to public policy. The concern raised in the case was that the existence of a no-contest clause would, effectively, bar a beneficiary from bringing a 1975 Act claim against the estate if insufficient financial provision was made for them in the Will. However, the Judge held that no-contest clauses do not prevent the bringing of a 1975 Act claim, they only deter it; accordingly, while a no-contest clause makes it a more difficult decision for a beneficiary to bring a claim, they are not contrary to public policy and do not prevent 1975 Act claims from being advanced.

The case also confirmed that the court would consider any loss of benefit that arises from a beneficiary bringing a claim when considering the award to be made. For example, if the beneficiary received a £50,000 gift under the Will, but claimed provision of £100,000 under the 1975 Act, the court could, even if your claim to a greater sum was unsuccessful, provide for an award of £50,000 on the basis that this was reasonable provision under the Act, thus ensuring that the original entitlement under the Will is preserved.

The no-contest clause in Nathan v Leonard was particularly interesting as it did not just provide that the contender would lose their benefits under the Will; the clause also provided that, in the event of contest by the testator’s son or the charities to whom she left sums, everything would go to the testator’s two friends. Therefore, challenges by the son and the charities were intertwined and if any one of them challenged the Will, all of them would lose their beneficial interests; the Judge found no issue with this but it would be interesting to see how this would play out in practice if one party wished to pursue a challenge and the other did not.

In the end, the no-contest clause in Nathan v Leonard was found to be invalid on grounds of uncertainty, but that was due to ineffectual drafting and was not related to the validity of the no-contest clause itself.

Gift Over

Nathan v Leonard confirmed that, in order for a no-contest clause to be valid, a gift over is required. In other words, in the event that a beneficiary brings a claim, there must be a direction within the Will as to whom the forfeited entitlement should pass instead.

In the absence of such a direction within the no-contest clause, the assumption will be that the testator’s only objective was to threaten the beneficiaries; however, if the testator has provided that the entitlement be left to someone else, this will likely be enough to convince the court that the no-contest clause was more than just a threat.

Successful Challenges

Interestingly, a no-contest clause does not discriminate between successful and unsuccessful claims; therefore, even if a claim is successful, the beneficiary will forfeit their entitlement under the Will. Usually, this will not matter as the beneficiary will have won their case and achieved a better result than under the original Will.

If the Will is contested and found to be invalid, then the no-contest clause is also invalid and any previous Will becomes the valid Will or the intestacy rules apply and the contesting beneficiary can still benefit (so long as they benefit under the previous Will or through intestacy).

If the Will is contested by way of a 1975 Act claim, the beneficiary will lose their entitlement under the Will, but will be reasonably provided by the court on their successful claim.

Conclusion

No-contest clauses are valid in the UK provided that there is a gift over and can be useful deterrents to beneficiaries challenging a Will. If you are seeking to contest a Will with a no-contest clause, it is important to seek legal advice as to the potential success of your claim as once the claim is made, the no-contest clause is triggered and the ramifications are potentially severe. Please contact Birketts’ expert Contentious Trusts and Probate Team for an initial consultation.

This article was written by Jenny Howe, Associate. For any enquiries, please contact Jenny or another member of our team on 01473 406386 or at disputeawill@birketts.co.uk.