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NO CONTEST CLAUSES IN
WILLS: EFFECT ON WILL CONTESTS
INTRODUCTION:
It is typical in a Will drafted in
California and most other
states that a variation of the following clause will appear:
Except
as otherwise provided herein, I have intentionally and with full
knowledge omitted to provide for my heirs. If any beneficiary under this Will in
any manner, directly or indirectly, contests my Will or any of its
provisions in any legal proceeding that is designed to thwart my wishes
as expressed in my Will, any share or interest in my estate given to that
contesting beneficiary under my Will is revoked and shall be disposed of
under the terms of my Will as if that contesting beneficiary had
predeceased me without issue.
The above clause is
commonly termed a “No Contest” clause and seeks to stop
Will Contests before they
can begin. The reader should review our article on Will Contests before
reading further.
But the above clause
is not always capable of stopping a Will Contest and this article shall
discuss California law’s restrictions on the effectiveness
of No Contest clauses.
Definition of “No
Contest” Clause
Probate Code
(“PC”) section 21300 et. Seq.
defines “contest” and provides the basic law as to the
enforceability of the clauses, in conjunction with common law and case
law. The code states that a “contest” means an attack in a
proceeding on an instrument or on a provision in an instrument. Under
that definition, at “attack” may be the initiation of a
proceeding which can be a formal Will Contest or other types of
pleadings, such as a petition to revoke probate of a will. A proceeding
seeking an interpretation of a will or other dispostive instrument is not
an attack on the instrument and does not constitute a contest of the
instrument: it is only an effort to ascertain the true intentions of the
author of the instrument. Graham
v Lenzi (1995) 37 Cal App 4th, 248.
But note that an
indirect attack in a separate proceeding that nullifies or voids a the
express wishes of the creator of the instrument may constitute a
“contest” for purposes of a no contest clause and a federal
complaint by a surviving spouse against a pension plan administrator to
assert community property rights to plan benefits that had been
transferred to a trust was held to be a contest. Burch v George
(1994) 7 Cal 4th 246. Another example of an ancillary
proceeding held to be a contest for the purposes of the no contest clause
was a proposed challenge by a surviving spouse of a corporate stock
redemption agreement which was a “cornerstone” of the
decedent’s integrated estate plan. Genger v Velso (1997) 56
Cal App 4th 1410.
As for definition of
what a “no contest clause” is, the code provides that it is
any provision in an otherwise valid instrument that, if enforced, would
penalize a beneficiary if the beneficiary brings a contest. (PC 21300
(b)). The technical term of a no contest clause is an “in terrorem” clause.
Enforceability of No Contest
Clauses
Not only are no
contest clauses allowed in California, they are favored by the Courts in
discouraging litigation and giving effect to the purposes expressed by
the testator. However, because their effect is to result in forfeiture of
significant rights and properties, they are strictly construed whether in
a will or an intervivos trust. Whether a contest has occurred is
determined on a case by case basis.
No contest clauses are
interpreted to create a condition on the transfer of a bequest or
disposition that the recipient must meet in order to inherit. In effect, a
no contest clause in a will conditions the rights of the recipient named
in the will or trust to take the gift provided for in the will or trust
based on acquiescence in its terms. See Burch V George (1994)
supra.
EXCEPTIONS TO
ENFORCEABILITY
Statutory:
There are both
statutory and common law exceptions to the enforceability of the no
contest clauses and the exceptions invalidate any effort of the no
contest clause to disinherit.
Under PC 21305, the
following actions do not constitute a contest UNLESS expressly identified
in the no contest clause as a violation of the clause:
1. The filing of a
creditor’s claim or prosecution of an action based on it;
2. An action or
proceeding to determine the character of property;
3. A challenge to the
validity of an instrument, contract, agreement, beneficiary designation
or other document other than the instrument containing the no contest
clause; and
4. A petition for
settlement or compromise affecting the terms of the instrument.
Thus, most wills
seeking to maximize the effect of the No Contest clause will specifically
mention one or more of the above exceptions.
Further, the following
proceedings do NOT violate a no contest clause regardless of the language
in any instrument, as a matter of public policy:
1. A petition seeking
relief under PC 15400-15414 regarding modification and termination of
trusts;
2. A petition under PC
1800-1969 regarding conservatorship;
3. A petition under PC
4100-4310 regarding powers of attorney;
4. A petition seeking
an order annulling a marriage of the person who executed the instrument;
5. A petition under PC
2403 regarding a petition for instructions or confirmation of acts;
6. A petition
challenging the exercise of a fiduciary power;
7. A petition
objecting to the appointment of a fiduciary or seeking the removal of a
fiduciary; and
8. Objections or other
responsive pleading to an accounting of a fiduciary.
Declaratory Relief:
Further, and this is a
most useful tool to determine the danger a contestant faces, the no contest
clause does not apply to a petition for declaratory relief under PC 21320
to determine whether a particular motion, petition or other act would be
a contest within the meaning of the clause. (PC 21320 (b))
Forgery:
A no contest clause is
not enforceable against a beneficiary who brings a contest limited solely
to the grounds of forgery or revocation or both. (PC 21306 (a). Note,
however, that the beneficiary must have reasonable grounds to bring the
contest.
Transfer to Drafter,
Witness or Other Specified Persons:
PC 21307 provides that
a no contest clause is not enforceable against a beneficiary to the
extent that the beneficiary, with probable cause, contests a provision
that benefits any of the following persons:
1. A person who
drafted or transcribed the instrument;
2. A person who gave
directions to the drafter of the instrument concerning substantive
contents of the provision or who directed the drafter to include the no
contest clause in the instrument. This rule is void, however, if the transferor
affirmatively instructed the drafter to include the contest of the
provision or the no contest clause;
3. A person who acted
as a witness to the instrument.
There are other
exceptions of relatively minor import. The reader is advised to seek competent
counsel prior to commencing any contest to determine if any of the above
exceptions would apply.
Practicalities:
The various exceptions
listed above make it clear that the Courts seek to avoid the forfeiture
clause of no contest provisions in actions in which there is likely
forgery, fraud, conflict of interest and the like or where an incompetent
person is involved. Nevertheless, the no contest provisions are
exceptionally powerful clauses beloved by testators who are afraid that
prolonged will contests will cost the estate much money and wish to avoid
the turmoil and delay that a will contest can cause. The contestant must
be wary of assuming that their efforts will be successful and must
consider carefully the cost benefit of proceeding to invalidate a
provision.
Note that if the
entire Will is somehow invalidated, the no contest clause would also be
invalidated.
Our office normally
recommends the no contest clause in most of its instruments since we have
often seen the disastrous damage done to estates when family members and
their lawyers commence proceedings in Court. The key is appropriate
estate planning so that the testator’s wishes are well considered
in which case the no contest clause makes excellent sense.
For a potential
beneficiary who is dismayed by a Will or Trust and is convinced that a
contest is valid, the key is to obtain competent legal advice long before
filing any action and if there is any question that the contest might
invoke a no contest clause, ask counsel to consider seeking declaratory
relief prior to commencing the contest, as described above.
One client put it
well: the no contest clause can make the attempt to invalidate the will
an “all or nothing” attempt in which the benefits of success
pale in comparison to the detriment of failure. Careful and wise planning
is essential for any potential contestant.
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