In July, the Massachusetts Appeal Court in Capobianco v. Dischino Capobianco v. Dischino, 19-P-197 (Mass. App. Ct. Jul. 9, 2020) ruled that a beneficiary forfeited his beneficial interest in a Trust established by his parents when he filed an action seeking to remove the successor Trustees and be appointed as sole Trustee. The Court held that the beneficiary, by bringing the action, violated the no-contest clause, which provided that any person who attempts to contest any provision of the Trust is deemed to have predeceased the settlors.
A no-contest clause is also known as an in terrorem clause, which is Latin for terrorize. As its name implies, if a beneficiary violates the no-contest clause, he/she will suffer the consequences set forth in the clause, which is often to forfeit his/her interest as a beneficiary.
The Court began its discussion by noting that no-contest clauses are narrowly construed because generally the law disfavors forfeitures. The Court pointed out, however, that the Trust instrument under consideration specifically prevented a beneficiary from serving as a sole Trustee. By bringing an action to remove the Trustees and to serve alone, he challenged the terms of the Trust and violated the no-contest clause. The Court notes that had the beneficiary been successful in removing the Trustees and appointing himself, the terms of the Trust regarding the succession of the Trustees would not have been carried out.
The case highlights the importance of taking great care when considering a challenge to a trustee’s actions. If the challenging party is a beneficiary and the trust contains a no-contest clause, the no-contest clause has to be reviewed carefully. In the Capobianco case, had the beneficiary sought an accounting or filed a petition seeking an interpretation of the instrument, approaches the Court noted were well within his rights, he would not have forfeited his interest. If you would like more information about this decision or need assistance with your estate and trust planning, please contact PLDO Partner Gene M. Carlino in Rhode Island at 401-824-5100 or in our Florida office at 561-362-2030 or email firstname.lastname@example.org.
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