Kristine M. Carlson, Appellant v. Crissy Colangelo, individually and as trustee of the Donald P. Dempsey Revocable Trust, et al., 44 N.Y.3d 116, 269 N.E.3d 179, 242 N.Y.S.3d 193 (2025)

Estate & Trust Litigation – Will and Trust Contests – In Terrorem Clauses

McCarthy Fingar’s lawyers often deal with “in terrorem” clauses in estate and trust litigation involving Wills and Trust Agreements. An in terrorem clause, also known as a no-contest clause, is a provision in a will or trust that disinherits a beneficiary if they challenge the document’s validity or its provisions. In Carlson v. Colangelo, et al., two of our lawyers, Irma K. Nimetz and Frank W. Streng, represented a client, in which the lower court and one appellate court had determined that our client violated an in terrorem clause, and, thus, forfeited her legacies under the decedent’s trust agreement. However, on appeal, the Court of Appeals disagreed with the lower courts and agreed with our client. Irma, who argued the case, convinced the Court of Appeals that our client did not violate the in terrorem clause and thus did not forfeit her legacies.

In this case, Donald P. Dempsey, who was never married and did not have children, executed a pour-over will and revocable trust, The Donald P. Dempsey Revocable Trust, while he was hospitalized and shortly before he died. In the Trust, Donald, the grantor of the Trust (“grantor”, “Donald” or “decedent”) bequeathed a house in Cortlandt Manor, New York (the “Premises”) that he shared with Kristine M. Carlson (“Kristine” or “plaintiff”), a registered nurse and Donald’s girlfriend since 2004. Donald also bequeathed “a stream of income” of up to $350,000 to Kristine. The trustee of the Trust was Crissy Colangelo (“Trustee Colangelo”), the daughter of one of Donald’s former girlfriends. Trustee Colangelo was also a beneficiary under the Trust. The decedent provided for both Kristine and Trustee Colangelo in his will and Trust though the language of both instruments differ.

Two of the relevant provisions in the Trust provided:

B. After application of paragraph A of this Article, the Trustee shall distribute all of the Grantor’s interest or this Trust’s interest in and to Dempsaco LLC, a limited liability company operating at 122 Waterbury Manor, Cortlandt Manor, New York 10567, to CRISSY COLANGELO, presently residing at 8 Park Avenue, Apt. #1, Goldens Bridge, New York 10526, if she survives the Grantor. It is the Grantor’s sincere wish and desire that CRISSY COLANGELO provide a stream of income, not to exceed the sum of Three Hundred Fifty Thousand ($350,000) in total, to KRISTINE M. CARLSON, presently residing at 122 Eton Downs, Cortlandt Manor, New York 10567 if she is then living, or if she is not then living, to her then living issue, per stirpes. [Emphasis in original].

C. After application of paragraphs A and B of this Article, the Trustee shall distribute all of the Grantor’s interest or this Trust’s interest in and to 122 Eton Downs, Cortlandt Manor, New York 10567, to KRISTINE M. CARLSON, presently residing at 122 Eton Downs, Cortlandt Manor, New York 10567, if she survives the Grantor, or if she does not survive the Grantor, to her then living issue, per stirpes. [Emphasis in original].

Kristine alleged that she invested $100,000 in Dempsaco LLC with Donald and became a 50% owner of Dempsaco.

Both the will and the Trust contained an “in terrorem” clause. The in terrorem clause in Article Ninth of the Trust provided, in part, that:

In the event that any heir, distributee, beneficiary, agency, organization or other individual (“challenger”) shall contest any aspect of this Trust, or the distribution of the Grantor’s assets pursuant to his Last Will, inter vivos Trust Agreement, beneficiary designations or non-probate beneficiary designations, or shall attempt to set aside, nullify, contest, or void the distribution thereof in any way, then the Grantor directs that such rights of such challenger shall be ascertained as they would have been determined had that challenger predeceased the execution of this instrument and the Grantor, without living issue….

Trustee Colangelo did not notify Kristine that she was a beneficiary under the Trust until approximately two and one half years after Donald died. Trustee Colangelo advised Kristine, by a letter from the attorney for Trustee Colangelo, that Kristine was a beneficiary under the Trust of the Premises and a stream of income of up to $350,000. However, Trustee Colangelo explained that she would only distribute the Premises to Kristine if she signed a receipt, release and indemnity agreement, which, among other things, provided that Kristine would release Trustee Colangelo from all liability and indemnify her. In addition, Trustee Colangelo informed Kristine that she would not receive the stream of income of up to $350,000 because the Trustee determined that the decedent used “precatory language” regarding the stream of income, that Decedent overestimated his estate and that the Trustee and Dempsaco lacked funds or assets “to pay anything” to Kristine.

Trustee Colangelo’s counsel rebuffed the attempts by Kristine’s counsel to resolve the impasse without litigation. Kristine then commenced a lawsuit against Trustee Colangelo and Dempsaco to enforce her rights under the Trust and to obtain the two bequests the decedent wanted her to receive.

In the litigation, Kristine commenced an action against Trustee Colangelo and Dempsaco in the Supreme Court, Westchester County. Plaintiff demanded, among other things, relief including an injunction directing the Trustee to distribute the Trust’s interest in the Premises to Kristine; a declaration that Kristine is a 50% member of Dempsaco; a declaration that Kristine is entitled to the stream of income up to $350,000, compensatory damages not less than $350,000, punitive damages, an accounting of Dempsaco’s income and expenses since Donald’s death and the imposition of a constructive trust on Dempsaco’s proceeds.

The Supreme Court denied Defendants’ motion to dismiss the Verified Complaint. Thereafter, while discovery was still ongoing, Defendants moved for partial summary judgment arguing that Kristine was not a member of Dempsaco; Kristine opposed the motion and cross-moved for summary judgment asserting that she was entitled to the Premises. The Supreme Court granted Defendants’ motion and denied Kristine’s cross-motion. Kristine did not perfect an appeal from this decision and order. Thereafter, Defendants moved for summary judgment arguing that by claiming a 50% interest in Dempsaco, Kristine violated the in terrorem clause in the Trust. Kristine opposed the motion claiming that her action was meant to construe and enforce the Trust, not contest it. Kristine also cross-moved for summary judgment on her claims concerning the Premises, the income stream and unjust enrichment. The Supreme Court granted Defendants’ motion and awarded Defendants’ attorneys’ fees. Kristine appealed to the Appellate Division, Second Department, which granted a stay of enforcement of the Supreme Court’s order.

The Appellate Division, Second Department, modified the Supreme Court’s order by denying Defendants’ motion for attorneys’ fees and otherwise affirmed.

In its Opinion decided April 17, 2025, the Court of Appeals held:

because plaintiff’s lawsuit seeks to enforce the Trust provisions as written and intended by the grantor, plaintiff did not attempt to nullify the Trust or challenge its terms. Thus, plaintiff did not violate the in terrorem clause and defendant is not entitled to summary judgment. We further conclude that plaintiff has established her right to summary judgment on her first cause of action regarding her ownership rights to the Premises and her motion should be granted to that extent.

The Court of Appeals held that there are triable issues of material fact as to plaintiff’s second cause of action concerning the income stream and remitted for resolution such action to the Supreme Court, and, in addition, held that plaintiff’s fourth cause of action seeking damages under an unjust enrichment theory must be considered, in the first instance, by the Supreme Court.

Further, the Court of Appeals found that:

“We now clarify that in terrorem clauses in trust agreements, like those in wills are enforceable but not favored, and must be strictly construed.”

“None of these causes of actions and demands [asserted by plaintiff/Kristine] for relief contests the legality of the Trust instrument.”

“Nor does plaintiff challenge any of the Trust’s bequests. To the contrary, she seeks distribution of her bequests in full accord with the Trust and in satisfaction of the grantor’s intent.”

“There can be no argument that her request for this distribution [the Premises] triggers the in terrorem clause.”

“Plaintiff’s action to protect her interest in the Premises was wholly consistent with the grantor’s intent.”

“Plaintiff’s action did not trigger the clause, and she is therefore entitled to judgment as a matter of law on this [first] cause of action seeking recognition of plaintiff’s title to the Premises.”

“Plaintiff’s claim that she is a 50% member in Dempsaco likewise does not amount to a challenge to the Trust or to the grantor’s intent. Her claim does not trigger the in terrorem clause and result in a forfeiture of her bequests under the Trust.”

“The purpose of the in terrorem clause is to discourage challenges to the Trust that would upset the grantor’s distributive intent. An action like plaintiff’s, meant to require the Trustee to distribute the Trust in accordance with its stated provisions, is not a challenge to the grantor’s distributive plan. Indeed, it would be contrary to the grantor’s intent to hold that a party cannot file an action to receive exactly that which the grantor set aside for transfer to their named beneficiary.”