The Fine Art of Intimidating Disgruntled Beneficiaries with in Terrorem Clauses
SMU Law Review, Vol. 51, p. 225, 1998
50 Pages Posted: 5 Mar 2009
Date Written: March 3, 2009
One of the oldest techniques used to protect the testator or settlor's intent for the distribution of his estate, including the transfer of property via trusts, is the use of the in terrorem clause, a provision that seeks to scare the beneficiary into acceptance of the instrument's terms by threatening to void the beneficiary's gift if his challenge to the instrument is unsuccessful. Many jurisdictions, including Texas, recognize the validity of such clauses. However, Texas case law is conflicting with earlier courts providing for strict enforcement and later courts discounting forfeiture if the beneficiary brought the case with probable cause and in good faith. This inconsistency and lack of statutory authority present the problem of unpredictability of utilizing in terrorem clauses. This article first observes the clause's history. It then examines the four approaches currently followed to evaluate the provisions by United States courts and legislatures. The focus shifts to Texas's use and judicial treatment of the clause, its validity in the state, and the uncertainty resulting from conflicting reported decisions. Finally, the authors address the need for a comprehensive in terrorem statute in Texas and conclude with a proposed statute designed to remedy the current inadequacies of the case law.
Keywords: wills, in terrorem clause
JEL Classification: K11, K19, K39
Suggested Citation: Suggested Citation