No Contest Clauses: A Cayman Perspective

It is common for those establishing trusts to take steps to ensure their hard work is not undone by beneficiaries litigating future grievances. One of the tools in a trust advisor's arsenal is a provision which can disincentivise challenge and mitigate litigation risk arising from estate planning. That provision is known as a no contest clause.

What is a no contest clause?

A no contest clause is a provision sometimes seen in discretionary trusts and wills. It discourages or prevents beneficiaries from seeking to contest the terms of the relevant trust deed or, in some cases, challenging actions by a relevant fiduciary. Provisions of this nature need to be approached with care, both when drafting and when exercising relevant exclusion powers. Ousting the jurisdiction of the Court by threatening the removal of benefit as a deterrent to parties litigating grievances can be considered contrary to public policy and, at its extreme, a contempt of Court.