In Terrorem Clauses – Enforceable or Not? Part 2

In my post last week, I explained the concept of an in terrorem clause.  These clauses are designed to discourage will challenges, however they do have limitations.  They work by providing that if someone challenges the will they would receive nothing.  This acts as a disincentive to challenging the will if the person loses whatever they were going to receive.

There is a common misunderstanding, however, about the scope of this clause.  It does not act as a complete bar to a will challenge.  In fact, New Jersey law specifically provides that “a provision in a will purporting to penalize any interested person for contesting the will or instituting other proceedings relating to the estate is unenforceable if probable cause exists for instituting the proceeding”.

What this means is that if probable cause exists, the right to contest the will still exists.  For example, if the testator signed the will under duress or undue influence or lacked the mental capacity to execute a will, then a challenge can still be made.  It’s just that the in terrorem clause raises the stakes, so to speak.  If the applicant is unsuccessful and probable cause to file the action did not exist then the applicant would lose the case but the loss doesn’t stop there.  The challenger also loses the inheritance which he or she was to receive.  That is how the clause discourages but doesn’t completely eliminate will contests.