A no-contest, or in terrorem, clause, is frequently used in wills, trusts and other estate planning documents to minimize the likelihood of a disgruntled beneficiary challenging the estate plan. The phrase ‘in terrorem’ is Latin meaning ‘to frighten’ or ‘terror’. The basic concept is that if a beneficiary launches an attack on the estate plan and is not able to convince a court to change it, then that beneficiary loses any gift under the estate plan. A typical no-contest clause might reduce an expected intestacy gift (perhaps 50% of the estate), down to something smaller, perhaps 10% of the estate. Under this hypothetical, if the beneficiary accepts the estate plan, he receives the 10% gift, but if he challenges the plan (hoping to receive 50%) and loses, he receives nothing. No contests clauses are quite common in California and have been the subject of evolving legislation and extensive litigation.
Now from Russia comes penalty that exceeds anything dreamed up by the most creative estate planner. On February 12, 2008, Badri Patarkatsishvili, described as a post-Soviet Oligarch, died of a massive heart attack leaving an estate allegedly valued at billions of dollars. According to his family, Mr. Patarkatsishvili did not leave a will. In a recent Los Angeles Times article, a Russian-born New York lawyer named Emanuel Zeltser appeared at Mr. Patarkatsishvili’s wake and advised the grieving widow that her late husband had signed a secret will naming him and a half-cousin as executor. During the following month, attorney Zeltser and the half-cousin sought access to Mr. Patarkatsishvili’s global investments. Mr. Patarkatsishvili’s family sued in U.S. federal court, accusing the two Americans of trying to loot the huge estate with forged documents. The family called Zeltser’s documents “invalid …” noting that several “appear to be forgeries”.
According to the Los Angeles Times, attorney Zeltser had a very colorful background. Born in Siberia, Zeltser immigrated to Texas in 1974 and in 1990, was admitted to practice law in New York. During his time in the United States, Zeltser has been sued at least three times for alleged fraud including one New Jersey case where a jury concluded that Zeltser had wrongfully seized a business and was ordered to pay more than $2 million in damages. In 1993, attorney Zeltser was retained by a Russian bank, but was later accused of using his position to steal as much as $6 million of investment accounts. An attorney for the bank declared that Zeltser was a “career con man” who “forges documents on a routine basis.”
In early March, Zeltser met several times with Boris Berezovsky, another Russian oligarch and former business partner of Mr. Patarkatsishvili. While Mr. Berezovsky backed Mr. Patarkatsishvili’s widow, Zeltser allegedly proposed they work together instead and drafted an agreement to secretly divide most of the assets between them, leaving only 15% for the family. On March 11, 2008, the offer was rejected when Messrs. Zeltser and Berezovsky shared a meal at a London restaurant. After the meal, Zeltser allegedly boarded Berezovsky’s private jet believing that he was heading to Miami, but instead landed in Minsk, the capital of Belarus. Zeltser was arrested at the airport and charged with economic espionage and using false official documents to defraud Mr. Patarkatsishvili’s estate. After a closed-door trial, Zeltser was sentenced to three years in Penal Colony #15 in eastern Belarus, where he remains to this day.
I can think of at least a few clients over the years that would love to include such a clause in their estate planning documents. While not possible in the United States, attorney Zeltser’s case certainly presents a cautionary tale for those fighting over estate planning documents in other jurisdictions.