A Shift in the No-Contest Clause Law Leaves Room For Estate Plan Revisions

No contest clauses served the function of “preventing” a beneficiary from challenging the contents of an estate planning document. Essentially, the no contest clause prevented a disgruntled beneficiary from telling a court that they were come how entitled to more than they were given, or that someone else was given too much, once you were gone.

Pursuant to the no contest provisions in a document, if a beneficiary under a will or trust filed a petition to contest (or question) the validity of the document, in an effort to have the court void or change the document, the no contest clause would have the effect of disinheriting the beneficiary. In essence the clause would provide: If you don’t like the gift I have given you, you will take nothing instead.

The law in California has provided for many years for a beneficiary to ask the court, before filling a challenge, whether their proposed petition would be considered a violation of the document's no contest clause. This was referred to as a “safe harbor” petition. If the court ruled against the person filing the safe harbor, then they would know that if they chose to file their petition anyway, then their inheritance was at risk. If the court ruled in favor of the person filing the safe harbor, then they would be able to file their petition without risking their inheritance.

On January 1, 2010, the law in California was changed. The "safe harbor" rights have now been repealed, and Probate Code 21310, et seq., have been added. The new laws define many phrases used in Wills and Trusts, including the definitions of a "contest" and "direct contest". Therefore, there is no longer a "safe harbor" provision. Instead, the new laws state that a "no contest" clause shall only be enforced against the following types of contests:

(1) A direct contest that is brought without probable cause. A "direct contest" is one that challenges the terms of a Will or Trust based upon numerous grounds, including lack of capacity, menace, duress, fraud, or undue influence.

(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.

The biggest change in the law is that a disgruntled beneficiary can now file a direct contest to challenge the terms of a Will or Trust. If the disgruntled beneficiary wins, the court will have expressly determined that the beneficiary met his or her burden of proof by showing that the challenged document was void, based on lack of capacity, menace, duress, fraud, or undue influence, amongst certain other factors.

If however, the disgruntled beneficiary loses, they must prove that they had enough "probable cause" to warrant their belief that the Will or Trust provisions would have led a reasonable person to believe that one or more of the elements mentioned above existed. If the court determines that probable cause existed, then the beneficiary will not forfeit their gift contained in the document. If probable cause is not found to exist, then the beneficiary will be determined to have violated the no contest clause and thus be disinherited.

Since this new law is yet untested, cases will be appealed and the appellate courts will interpret these new laws and provide clarity on their application to specific facts. Therefore, if you would like to ensure that your wishes are carried out and that you have provided incentive for those people included in your estate plan to think twice before challenging your wishes, you should visit with your estate planning attorney to ensure that your wishes are properly accounted for.