Good estate planning attorneys always try to reduce or eliminate family discord through proper estate planning. A common estate planning tool to discourage disputes and litigation over an estate plan is the “no-contest” clause.
In the past, a typical no-contest clause might have simply read “if anyone contests this will (or trust, as the case may be), that person will receive only one dollar from my estate.” Today, California law particularly describes which actions taken by a beneficiary will be considered a contest or challenge to the estate plan. In general, any beneficiary that makes certain types of challenges to the validity of the estate plan in a court proceeding might forfeit what he or she would have received under the estate plan. In other words, if a beneficiary goes so far as to file a court case against the estate, the beneficiary may be treated as though he or she died before the creator of the estate plan. Good estate planning attorneys generally include the entire text of the relevant California law in the estate planning documents to make sure there are clear indications about what type of actions are acceptable and which are not.
When a challenge is not to the estate plan itself but instead, the challenge is to the actions of someone administering the estate, generally the no-contest clause is not triggered. Public policy favors holding fiduciaries (the persons entrusted with duties on behalf of others) to the highest level of good faith, loyalty and diligence. To ensure that duties are appropriately carried out, courts generally permit lawsuits that call the fiduciary to account for his or her actions on behalf of the estate.
The following is an example of a situation in which a no-contest clause would be useful. A widow creates a living trust which provides that her estate is to be divided evenly between her three children. Unfortunately, she suffers a stroke, is hospitalized and spends several months in rehabilitation. During the course of her illness, her youngest child, a son, visits her regularly in the hospital, arranges home health care when she is released, and takes her to her doctor’s appointments. The other two children never seem to have time to see about their mother. They visit sporadically and don’t lift a finger to help improve her situation. Mother then amends her trust to give 50% of her estate to her doting son and 25% each to the other two children. She also adds a no-contest clause.
It is foreseeable that the two children who received less than their brother may feel cheated when mother passes away and they learn of her plan of distribution. They might think that the brother somehow “encouraged” their mother to give him a larger share of the estate. Seldom do they recognize that their own shortcomings might have led to the unequal treatment. While they may be disgruntled about the turn of events, they should think twice about challenging the trust in view of the no-contest clause. Better yet, they should consult an attorney before taking action that will result in them getting nothing at all.
[© 2022 by Marlene S. Cooper. All rights reserved. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article.]