No Contest Clauses – Will they lead to greater testamentary freedom and less inheritance disputes?

The recent case of Sim v Pimlott and others [2023] EWHC 2296 (Ch) considered whether a “no contest” clause in a will can successfully deter a claim against a testator’s estate. This is potentially a valuable tool for testators if such a clause works.

What is a no contest clause?

A no contest clause seeks to discourage disappointed beneficiaries from challenging a will, by placing conditions on their gift.  Usually, the clause stipulates that any beneficiary who chooses to bring a claim against the estate will forfeit their entitlement under the will entirely, ultimately running the risk of receiving nothing at all.  No contest clauses are also referred to as “forfeiture” clauses or “in terrorem” clauses. They are becoming more popular due to the recent rise in inheritance disputes, which have recently been revealed by the Ministry of Justice to have risen by 35% since 2017, and over 140% in the past ten years.

The Circumstances in Sim v Pimlott

Dr Sim passed away in 2018, following a 35 year relationship with Mrs Sim.  The couple had been married for the 20 years prior to Mr Sim’s death, however, their relationship was reportedly “complicated”, with some allegations of domestic abuse and sexual violence made by Mrs Sim, and divorce proceedings were pending.

In late 2017, Mr Sim executed a will, and was advised by his lawyers to make reasonable financial provision for his wife from his estate.  Mr Sim included cash legacies of around £375,000 and a life interest in his residuary estate, to be held on trust during her lifetime and then distributed to his children.   The monetary legacies contained conditions that Mrs Sim released her rights to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”) and that she release her interest in their joint property in Dubai.  Mrs Sim did neither, and instead decided to proceed with a claim under the 1975 Act on the basis that the estate, valued at around £1.2 million at the date of Mr Sim’s death, did not make reasonable financial provision for her.

Mrs Sim’s claim was unsuccessful, with the Court finding that her late husband had indeed made reasonable provision for her in his will, and she was ordered to pay the other side’s costs.  The Court also ordered that the no contest clause was reasonable and should be effective. Mrs Sim therefore forfeited her right to the cash legacies and was left with the life interest alone.  The Court considered that this would leave Mrs Sim without access to any capital and would render her homeless, which would be unreasonable under the 1975 Act.  The trust was therefore varied to use capital to purchase a property for Mrs Sim to live in for the rest of her life. It was concluded that she would have been financially better off had she complied with the no contest clause. 

Effectiveness of no contest clauses and what this means for testators

The Court discussed the use of no contest clauses in general and expressed that it is reasonable to include a no contest clause within an objectively reasonable will.  The Court also expressed that, should a disappointed beneficiary lose their entitlement under the will due to a failed claim, they could not then assert that the will does not reasonably provide for them, should the no contest clause take effect.

A carefully drafted and reasonably used no contest clause can be an effective deterrent for disgruntled beneficiaries who may consider a claim under the 1975 Act or otherwise challenge the will.  The clauses may effectively deter vexatious claims, given that the potential claimant not only risks losing their inheritance, but may also be at risk of an adverse costs order.

A testator considering the use of a no contest clause should carefully consider the level of provision for potential claimants, in order that the clause is considered reasonable in the general context of their will.  A balance should be struck to provide a high enough sum that the claimant will not wish to forfeit, whilst limiting their inheritance as much as possible in accordance with the testator’s wishes.

What does this mean for will disputes?

Potential claimants contesting a will with a no contest clause will face higher stakes, as they are ultimately risking not only the loss of their inheritance, but also an adverse costs order, which would leave them worse off than before, had they just accepted the legacy they had been given.  They will also be unable to later argue that the will did not provide reasonably for them when the clause takes effect. 

Going forwards, the use of no contest clauses by testators attempting to protect their testamentary freedom may become more commonplace, particularly in light of the general upward trend in 1975 Act claims.  It would therefore be wise for any potential claimant to obtain legal advice and have the merits of their claim carefully assessed by a solicitor given the real risk that they end up worse off after bringing a claim where these clauses are present.