A “no contest” clause is a provision in a testamentary instrument (usually a will or a trust) that penalizes a beneficiary if he or she “contests” the instrument in a court action, usually by way of revoking any gift they may have been otherwise expressly given under the instrument. Many of our estate planning clients request a no contest clause be included in their will or trust and expect that such a clause will bar any challenge to, or litigation regarding, their estate plan. Unfortunately, this not necessarily the case.
The California legislature has significantly limited the scope and applicability of no contest clauses. Specifically, California Probate Code Section 21311, which replaced the prior law effective January 1, 2010, mandates that a no contest clause shall only be enforced against the following three types of contests:
(1) A direct contest brought without probable cause. This places the burden on the executor or trustee of the estate to show that the contestor lacked any probable cause (which is a fairly low legal standard) at the time the contest was filed;
(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; and
(3) The filing of a creditor’s claim or prosecution of an action based on it. (Note, however, that a no contest clause shall only be enforced under this option if the no contest clause expressly provides for that application.)
California’s prior no contest law was somewhat convoluted, and though the Probate Code proclaimed no contest clauses to be generally enforceable, there were a great many exceptions, which seemed to continue to grow, thus resulting in the new law. Generally, forfeiture was viewed as a harsh penalty and the goal became to view no contest clauses conservatively. Thus, the new law, in contrast to the old, generally assumes that no contest clauses are unenforceable and provides fewer exceptions to the general rule.
Take, for example, a situation where a beneficiary has filed a will contest alleging undue influence and lack of capacity. The will contains a no contest clause. The proposed executor files a petition to disinherit the beneficiary because, the proposed executor claims, the beneficiary lacked probable cause to bring the contest. It will be the executor’s burden to show that at the time of filing the contest the proclaimed beneficiary lacked probable cause to do so. This could procedurally result in an insurmountable task for the executor in the early stages and full discovery must be therefore be conducted, significantly draining the estate assets – which is typically one of the main goals of a client who is interested in a no contest clause.
While the reality seems bleak, there are drafting and planning tools that we can use in an effort to specifically address anticipated problem beneficiaries and provide some peace of mind.