My way or the highway – the effectiveness of a no-contest clause in your will

What is a no-contest clause?

A gift in a Will can be made subject to conditions. Conditions can be utilised to discourage beneficiaries from challenging a Will by stipulating that any beneficiary who contests the Will will forfeit their entitlement. These are known as No-Contest clauses, or also referred to as Forfeiture clauses or their Latin name “In Terrorem” clauses.

The clause acts as a warning from the testator to the beneficiaries not to seek more than already provided in the Will, otherwise they risk losing it all. The notion is that a beneficiary abides by the testator’s way or pursue a claim against the estate and take the “highway” with the risk of receiving nothing.

Sim v Pimlott

Dr Sim had been married to Valerie Sim for nearly 20 years at the time of his passing in 2018. They had been experiencing marital troubles with divorce proceedings pending between Dr Sim and Valerie. Dr Sim had children and grandchildren from his three marriages and one extra-marital relationship, and he made provision for said children and grandchildren in the Will he executed in December 2017.

Dr Sim’s Will included a No-Contest clause by stipulating that Valerie would receive £250,000 if she executed a Deed of Release of all rights that she may have to a claim under the 1975 Act. He also left an additional £125,000 on the condition she released her interest in their joint property in Dubai. Lastly, Valerie was left the income from the residue of the estate, which was to be held on Trust during her lifetime, and then distributed amongst his children. His Estate was worth approximately £1.2 million when he passed away.

Valerie did not release any rights to claims under the 1975 Act, nor did she release any interest in the property in Dubai. Instead, Valerie brought proceedings under the 1975 Act saying that Dr Sim’s Will did not make reasonable financial provision for her. Valerie did not comply with the No-Contest clause and subsequently forfeited her entitlement to the monetary gifts of £375,000.

The Court held that Dr Sim was entitled to have such a clause in his Will and that it was indeed effective. The Court additionally issued an adverse costs order against Valerie.

The Court expressed in more general terms that where provision in a Will is objectively reasonable, it is also reasonable to include a provision intending to dissuade beneficiaries from bringing claims against the Will. The Court explained that such claims would cause delay in the administration and distribution of the estate, and lastly result in costs being incurred in defending such a claim. In Sim v Pimlott, the beneficiaries were unable to access their full entitlement for over five years.

The Judge considered a range of factors but identified that if Valerie had complied with the No-Contest clause the amount she would have received including Dr Sim’s NHS pension would have been sufficient under the 1975 Act. Valerie consequently forfeited her entitlement to the two monetary sums and was left with only the life interest to income from the residue of the estate. In this case, the Judge found that this would leave Valerie homeless as she would have no access to any capital. The Judge did make an order varying the trust to require the Trustees to set aside a capital sum for Valerie to purchase a property.

What this means for you

The facts in Sim v Pimlott are somewhat unusual, but the case does have wider applicability by confirming the effectiveness of No-Contest clauses and their potential ability to discourage claims under the 1975 Act or alternative claims against the estate.

The case serves as a reminder for you to carefully consider whether a No-Contest clause is appropriate in your circumstances, and whether it is pitched appropriately. It must be of sufficient value to deter your beneficiaries from risking losing their current entitlement, but at the same time not be too generous as that might defeat your initial objective. This case also acts as a prompt to potential challengers to assess the merits of their own case before pursuing a claim under the 1975 Act where a No-Contest clause had been used in an objectively reasonable way.

If you need advice on whether to include a No-Contest clause or explore alternative approaches, contact our Succession and Tax team or alternatively if you are a beneficiary considering challenging a Will subject to a No-Contest clause, please contact our Contentious Probate team.