The use of “no contest” clauses to deter beneficiaries from challenging wills and trusts has grown in popularity. These clauses are motivated by the desire to have the beneficiaries, the trustees and personal representatives avoid time-consuming and costly litigation during the trust or estate administration.

The acceptance of the validity and scope of these “no contest” clauses varies widely across the country. In some states, e.g., Florida, such clauses are prohibited by state statute. In others, the clause cannot be enforced if a contest is brought in good faith.

In yet other states, a “no contest” clause can only be enforced if one or more provisions of the will or trust are challenged. On the other hand, if a beneficiary challenges a trustee over improperly administering the trust, then such a claim is not prohibited. In theory, the beneficiary in this scenario is seeking to enforce the trust, by compelling the trustee to conform to its terms and to the legal requirements for a proper administration under applicable trust law. In this instance, litigation will be allowed to enforce the terms of a trust.

A recent case decided by the Wyoming Supreme Court addressed a situation in which a beneficiary sued the trustee over several alleged breaches of the trust. See Spurlock v. Wyoming Trust Co., 542 P.3d 1071 (Wyo. 2024). One such breach involved the trustee allegedly turning off the heat in the building on a parcel of realty that the beneficiary subsequently exercised his purchase option to buy from the trust. The lack of heat allegedly caused flooding from cracked and ruptured pipes, which were not discovered until after the sale.

In addition to this claim that the trustee had not properly maintained the realty before the sale, the same beneficiary sought to remove the trustee for his failure to provide trust accountings and to comply with the trust provisions regarding the division of trust assets.

The trust in question had a “Noncontest and Litigation Provision.” The Settlor expressed his desire in this clause that the trust and the parties involved as trustees and beneficiaries not engage in time consuming and expensive litigation. To that end, the clause disinherited any beneficiary (and any beneficiary’s descendants) for challenging or in any way impairing the function or operation of the trust, its provisions or asset distributions.

The Trustee originally asserted two arguments as to why the beneficiary’s suit constituted a violation of the Noncontest Provision. He asserted that the trust provided a mechanism for removal of a trustee, either by the Settlor during lifetime or by a majority of the children after the Settlor’s death. The claim was made that this is the sole trustee removal provision in the trust, which was intended to be “mandatory and specific.” So the Trustee argued that an attempt to remove a trustee due to an alleged failure to provide accountings or follow asset division instructions was not permitted by the Trust Agreement. Further, the Trustee asserted that the court proceeding impaired the function and operation of the trust, by delaying the final trust distribution and causing litigation expenses.

The Wyoming Supreme Court found that the trustee removal provisions in the Trust Agreement were permissive in nature, and not mandatory. According to the Court, these provisions did not preclude the trust beneficiaries from invoking their rights under Wyoming statute to remove the Trustee for cause.

Further, the Court concluded that the suit did not impair the function or operation of the trust – and to the contrary, sought to enforce the trust and cause proper trust accountings and asset distribution instructions to be provided by the Trustee. While the Trustee had chosen in his own discretion to delay final trust distribution pending the litigation, the Court found that the intent of the suit was not to hamper the function or operation of the trust.

Although the Trustee made novel arguments as to why challenging his breaches of trust constituted an attack on the trust itself and its operation, the Court ultimately followed numerous prior decisions from other states concluding that a trustee removal action did not challenge the validity of the trust itself – and thus did not violate a “no contest” clause in the trust.