PROBATE COURTS AND DECEDENTS' ESTATES
NEW HAMPSHIRE TRUST CODE
LIABILITY OF TRUSTEES AND RIGHTS OF PERSONS DEALING WITH TRUSTEE
564-B:10-1014 Enforcement of No-Contest Provision.
(a) For the purposes of this section, a "no-contest provision" of a trust instrument means a provision that, if given effect, would reduce or eliminate the interest of any beneficiary of such trust who, directly or indirectly, initiates or otherwise pursues:
(1) Any action to contest the validity of the trust or the terms of the trust;
(2) Any action to set aside or vary the terms of the trust;
(3) Any action to challenge the acts of the trustee or other fiduciary of the trust in the performance of the trustee's or other fiduciary's duties as described in the terms of the trust; or
(4) Any other act or proceedings to frustrate or defeat the settlor's intent as expressed in the terms of the trust.
(b) A no-contest provision shall be enforceable according to the express terms of the no-contest provision without regard to the presence or absence of probable cause for, or the beneficiary's good or bad faith in, taking the action that would justify the complete or partial forfeiture of the beneficiary's interest in the trust under the terms of the no-contest provision. A no-contest provision shall be unenforceable to the extent that the trust is invalid because of fraud, duress, undue influence, lack of testamentary capacity, or any other reason. In the case of an action solely to challenge the acts of the trustee or other fiduciary of the trust, a no-contest provision shall be unenforceable to the extent that the trustee or other fiduciary has committed a breach of fiduciary duties or breach of trust.
(c) Subsection (b) shall not apply to the extent that a person initiates, maintains, or cooperates in any of the following actions or proceedings:
(1) Any action brought by the trustee or any other fiduciary serving under the terms of the trust, unless the trustee or other fiduciary is a beneficiary against whom the no-contest provision is otherwise enforceable;
(2) Any agreement among the beneficiaries and any other interested persons in settlement of a dispute or resolution of any other matter relating to the trust, including without limitation any nonjudicial settlement agreement;
(3) Any action to determine whether a proposed or pending motion, petition, or other proceeding constitutes a contest within the meaning of a no-contest provision;
(4) Any action brought by a beneficiary or on behalf of any such beneficiary for a construction or interpretation of the terms of the trust;
(5) Any action brought by the attorney general for a construction or interpretation of a charitable trust or a trust containing a charitable interest if a provision exists in a trust purporting to penalize a charity or charitable interest for contesting the trust if probable cause exists for instituting proceedings; or
(6) A proceeding described in subsection (h).
(d) It is the intent of this section to enforce the settlor's intent as reflected in a no-contest provision to the greatest extent possible. The provisions of this section shall be construed and applied in a manner consistent with such intent.
(e) This section shall apply to all judicial proceedings concerning the enforcement or interpretation of a no-contest provision commenced on or after its effective date.
(f) In the trustee's discretion, a trustee may suspend distributions to a beneficiary to the extent that, under a no-contest provision, the beneficiary's action potentially would have caused the reduction or elimination of the beneficiary's interest in the trust. In the trustee's discretion, the trustee may resume those distributions at any time or may continue to suspend those distributions until a court determines whether the beneficiary's interest in the trust has been reduced or eliminated.
(g) In the trustee's discretion, a trustee may decline to distribute trust property in accordance with a person's purported exercise of a power of appointment or a power of withdrawal to the extent that, under a no-contest provision, the person's action potentially would have caused the reduction or elimination of the power of appointment or the power of withdrawal. In the trustee's discretion, the trustee may make those distributions at any time or may continue to decline to make those distributions until a court determines whether the person's power of appointment or power of withdrawal has been reduced or eliminated.
(h) To the extent that the trustee acts in good faith, the trustee is not liable to any person for exercising the discretion under subsection (f) or (g) or not exercising that discretion. A trustee shall be presumed to have exercised the discretion in good faith if, in any judicial proceeding, an interested person other than the trustee has requested a determination of whether, under the no-contest provision, a beneficiary's interest in the trust, a person's power of appointment, or a person's power of withdrawal was reduced or eliminated. A trustee or any other interested person may commence a judicial proceeding for purposes of determining whether a trustee's exercise of discretion under subsection (f) or (g) was made in good faith.
Source. 2011, 243:13, eff. Sept. 11, 2011. 2014, 195:29, 30, eff. July 1, 2014.