A common tool for both Wills and Trusts is the use of a clause which provides that if someone tries to invalidate the Will or Trust in Court, that that person is automatically disinherited. The concept is that expensive and disruptive law suits are avoided since if one decides to contest the Will or Trust, one faces losing all.
This is standard language now in most estate plans and the Courts have traditionally limited their effect if minors are involved or if there was what the Court considered good cause to attempt the contest.
This article shall discuss the newest law in California which makes such clauses even more limited in scope.
The Basic Law Now in Effect in California:
No-contest clauses are disfavored and the revised law makes them even harder to enforce. The reader should first review our article on Probate of Estates.
Enforcement of no-contest clauses are limited to the following three situations under Probate Code section 21311:
A no contest clause shall only be enforced against the following types of contests:
(1) A direct contest that is brought without probable cause.
(2) A pleading to challenge a transfer of property on the grounds that it was not the transferor's property at the time of the transfer. A no contest clause shall only be enforced under this paragraph if the no contest clause expressly provides for that application.
(3) The filing of a creditor's claim or prosecution of an action based on it. A no contest clause shall only be enforced under this paragraph if the no contest clause expressly provides for that application.
The definition of a “direct contest” is found in Probate Code section 21310(b):
"Direct contest" means a contest that alleges the invalidity of a protected instrument or one or more of its terms, based on one or more of the following grounds:
(1) Forgery.
(2) Lack of due execution.
(3) Lack of capacity.
(4) Menace, duress, fraud, or undue influence.
(5) Revocation of a will pursuant to Section 6120, revocation of a trust pursuant to Section 15401, or revocation of an instrument other than a will or trust pursuant to the procedure for revocation that is provided by statute or by the instrument.
(6) Disqualification of a beneficiary under Section 6112, 21350, or 21380.
The definition of a “protected instrument” is found in Probate Code section 21310(e):
"Protected instrument" means all of the following instruments:
(1) The instrument that contains the no contest clause.
(2) An instrument that is in existence on the date that the instrument containing the no contest clause is executed and is expressly identified in the no contest clause, either individually or as part of an identifiable class of instruments, as being governed by the no contest clause.
It should also be noted that an amendment to a will or trust that does not explicitly contain a no-contest clause is not subject to enforcement of a no-contest clause found in an earlier instrument.
Thoughts:
With the application of the “probable cause” test, it means that if the Court concludes that the person contesting the document had any reasonable, even if erroneous, grounds to start the contest, they will not be disinherited even if they lose.
The problem with that approach is the cost of litigation. Sadly, the contest itself is likely to cost tens of thousands or even hundreds of thousands of dollars to contest given the extreme expense of litigation in today’s world. A contestant, realizing that economic fact of life, may file a weak claim expecting that the executor or Trustee will be required to offer a settlement to avoid the cost of litigation and the risk of losing the inheritance is now realistically greatly reduced. In an effort to protect the beneficiaries and allow them to challenge an invalid will or trust, the legislature has now opened the door for such claims expanding.
That said, a contestant now risks much less if he or she feels that undue influence or other improper means were used to create an invalid Will or Trust if any grounds exist to substantiate that claim.