One of the primary goals of estate planning is to reduce the disputes that occur among a deceased individual’s loved ones. While there are many ways to achieve that goal, these methods often include ensuring that all proper requirements are followed when executing documents, including carefully drafting trust terms and keeping estate planning documents unambiguous. When a family member feels that they were unjustly treated as a beneficiary, estate planners utilize a “no contest” clause. This article will examine some essential information about “no contest” clauses in California.
Purpose and Explanation
A “no contest” clause is term in a will or trust that can penalize a beneficiary if he or she files a contest with the probate court. A “no contest” clause provides that a beneficiary loses all inheritance from the estate plan if the beneficiary seeks to invalidate any of the estate plan’s provisions or documents. “A no contest” clause aims to discourage litigation by beneficiaries who are unhappy with litigation and require the beneficiary to choose between accepting the gift provided in the estate plan and losing one’s inheritance.
When No Contest Clauses Apply
While “no contest” clauses are rarely used to disinherit beneficiaries, these clauses still apply in cases where the requirements of the California probate code apply. To meet these requirements, the following standards must be met:
- Triggering Event: Individuals who undertake a “no contest” action must describe in the complaint an action that is specifically listed in the types of triggering events. Triggering events include direct contests of a document or attempt to directly overturn a will, trust, or creditors’ claims, and challenging the characterization of property as either community or separate.
- Probable Cause: An individual who files a no-contest clause must file this action with probable cause of success.
Individuals who do not meet established standards can be disinherited from legal actions.
Examples of Bad Trustees
Parties filing “no contest” actions must remember that there is no basis to disinherit a bad trustee simply for breaching a duty to the trust. This lack of basis means that trustee cannot have legal action brought against them simply for engaging in breach of a trust. As a result, the burden is on individuals filing the lawsuit to prove the case at trial.
Recent “No Contest” Clause Law
There are two substantial and recent California laws dealing with “no contest” clauses. In 2002, the California Supreme Court decided a case that upheld the requirement of probable cause in pursuing “no contest” clause cases in California. In 2013, in another case, the California Supreme Court limited the types of cases against which “no contest” clauses are applicable. These laws are largely remembered for shaping the current requirement for a “no contest” clause-based legal action in California.
If you are curious about the role of a “no contest” clause in estate planning, contact a seasoned and experienced California estate planning lawyer today.