Chapter 53 - § 53.8 • NO CONTEST — PENALTY CLAUSES IN WILLS AND TRUSTS

• Jurisdiction: Colorado

§ 53.8 • NO CONTEST — PENALTY CLAUSES IN WILLS AND TRUSTS

The Colorado Court of Appeals in In re Estate of Peppler, 971 P.2d 694 (Colo. App. 1998), held that if a will contains a penalty or no-contest clause, it is only enforceable if the beneficiary challenging the will did not act in good faith and did not have probable cause for commencing the will contest. A preliminary hearing, prior to the will contest, to determine the threshold issue of probable cause is permissible. The Peppler court relied on the Restatement (Second) of the Law of Property § 9.1 cmt. j for the definition of probable cause and noted that reliance on the advice of a disinterested attorney may assist in determining good faith. Peppler, 971 P.2d at 697. The court rejected the son's argument that an undue influence finding in a will contest was a per se determination of lack of probable cause, and remanded the case back to the trial court to make a determination of probable cause. Id. at 698; see David M. Swank, "No-Contest Clauses: Issues for Drafting and Litigating," 29 Colo. Law. 57 (Dec. 2000).

In a 2016 Colorado Court of Appeals case, In re Estate of Sandstead, 412 P.3d 799 (Colo. App. 2016), the appellate court upheld the district court's enforcement of an in terrorem clause (penalty clause) regarding a challenge to the decedent's will. The case is complicated by the fact that the trust contained the penalty clause, but the decedent's will did not. The court of appeals held that a writing in existence when a will is...