Keep it legal: Forfeiture clauses

Testators can seek to control their estates from beyond the grave by writing forfeiture clauses into their wills.

These clauses usually stipulate that a challenge of the will's contents will result in the beneficiary forfeiting what would have been their entitlement. It is common for testators to name one or more charities as the beneficiaries of any such forfeiture.

Charity beneficiaries can also be affected if they think there are grounds for challenging a will containing such a clause. In either case, organisations should be aware that the clause is likely to be upheld, benefiting the third party at the expense of the beneficiary doing the challenging.

The legal position on forfeiture clauses has not always been clear, but a recent English case has distilled the position into some guidance, drawing on both English and American case law. American cases reveal that different states have adopted a variety of approaches. In Florida, forfeiture clauses are void because they are considered contrary to public policy in seeking to restrict access to court. In Washington, they are strictly enforced. In Illinois, they are enforceable, but courts prefer not to enforce them.

It is now clear that English law permits the inclusion of forfeiture clauses in wills. To be valid, they must provide for others to receive the contesting beneficiaries' interest in the event of forfeiture. Clauses that stipulate that every beneficiary must forfeit their interests if any one of them contests the will are probably invalid. So too are clauses requiring forfeiture if a non-beneficiary contests the will.

A potential will challenger must be able to determine from the forfeiture clause whether the proposed challenge will trigger that clause - if the clause is uncertain, it is ineffective.

Importantly, a successful challenge, or one it was reasonable to make, will not trigger the forfeiture clause.

There remains plenty of scope for argument, of course, but the new guidance at least helps to clarify when forfeiture clauses might succeed or fail. Affected charities should take note, in order to be sure they receive their due entitlement.

- Jayne Adams is an associate in the charities department at Bircham Dyson Bell LLP.

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