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
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.
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))
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.
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.