Trigger Warning: the 'Safe Harbor' at Section 420

Abstract

In 2014, the Missouri legislature enacted a statute enabling a trust beneficiary to test the water before committing to a petition or motion that might trigger an in terrorem clause, forfeiting their interest in the trust.

Eight years have passed, and this statute has been addressed by Missouri appellate courts five times. The following discussion is somewhat out of chronological sequence, reserving the March 2020 opinion of the Missouri Supreme Court in Knopik v. Shelby Investments for last.

There is reason to believe the lawsuit in Knopik was contrived to force the question whether a clause that purports to relieve the trustee entirely of its fiduciary responsibilities is unenforceable as against public policy. The petitioner intentionally did not avail himself of the statutory safe harbor, and the court in effect held the clause operated as a condition subsequent to the beneficiary's interest in the trust, regardless of the merits of the claim.

In the author's view, Knopik was decided incorrectly.

Analytically, the in terrorem clause is an affirmative defense to the petition to remove. Here it was also raised as a counterclaim for declaratory judgment. In either of these procedural contexts the question of whether the clause is unenforceable should be fair game. The question does not simply disappear because the legislature has created an alternative mechanism for resolving it.

Keywords: in terrorem clause, safe harbor, bifurcated proceeding