No Contest Clauses are one of the most misunderstood aspects of California living trust litigation. Buffington Law Firm’s trust litigation attorneys often deal with situations that involve a “No Contest Clause” and whether or not a given No Contest Clause is applicable to a given trust litigation circumstance. In this brief Blog article we will cover some of the basics of No Contest Clauses in the context of California trust litigation for Direct Contests of a trust or trust provision. This area of law is tricky and often misunderstood. For this reason, if you are involved in trust litigation and believe that a No Contest Clause may be applicable to your situation, do not rely merely on this article or other articles that you find on the internet. Contact Buffington Law Firm’s trust litigation team or your own qualified attorney to have a qualified trust litigation lawyer examine the situation.
California Probate Code Section 21310 et seq. comprises the basic statutes that governs No Contest Clauses in California. California Probate Code Section 21310 provides several useful definitions, including:
(a) “Contest” means a pleading filed with the court by a beneficiary that would result in a penalty under a no contest clause, if the no contest clause is enforced.
(b) “Direct contest” means a contest that alleges the invalidity of a protected instrument or one or more of its terms, based on one or more of the following grounds:
(2) Lack of due execution.
(3) Lack of capacity.
(4) Menace, duress, fraud, or undue influence.
(5) Revocation of a will pursuant to Section 6120 , revocation of a trust pursuant to Section 15401 , or revocation of an instrument other than a will or trust pursuant to the procedure for revocation that is provided by statute or by the instrument.
(c) “No contest clause” means a provision in an otherwise valid instrument that, if enforced, would penalize a beneficiary for filing a pleading in any court.
(d) “Pleading” means a petition, complaint, cross-complaint, objection, answer, response, or claim.
(e) “Protected instrument” means all of the following instruments:
(1) The instrument that contains the no contest clause.
(2) An instrument that is in existence on the date that the instrument containing the no contest clause is executed and is expressly identified in the no contest clause, either individually or as part of an identifiable class of instruments, as being governed by the no contest clause.
[Cal. Probate Code Section 21310].
California Probate Code Section 21311 provides that:
(a) A no contest clause shall only be enforced against the following types of contests:
(1) A direct contest that is brought without probable cause.
(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. A no contest clause shall only be enforced under this paragraph if the no contest clause expressly provides for that application.
(3) The filing of a creditor’s claim or prosecution of an action based on it. A no contest clause shall only be enforced under this paragraph if the no contest clause expressly provides for that application.
(b) For the purposes of this section, probable cause exists if, at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery.
The most common “No Contest Clause” scenario (but not the only one!) involves a situation in which a beneficiary seeks to have a Court nullify either a trust instrument or part thereof, or an amendment to the instrument. For example, Dad and Mom’s Trust may have left the Trust Estate to all four of their children in equal shares. A later amendment may provide that one specific child shall take 100% of the trust estate to the exclusion of the other children — a very significant change. One or all of the other children may choose to bring a petition in court seeking to overturn the Trust Amendment on some grounds, such as, for example, alleging that it was procured by Undue influence. This would constitute a “Direct Contest” as defined by California Probate Code Section 21310 (b), supra.
Essentially, California Probate Code Section 21311 provides that a court will enforce a No Contest Clause involving a Direct Contest if the Court determines that the Direct Contest was brought without “probable cause”. This does not mean that the challenging party necessarily has to ultimately win the Direct Contest in order to evade the No Contest Clause, assuming that the subject trust contains one, as most of them do. It means that if another beneficiary of the trust, or the trustee, brings an action to enforce the No Contest Clause against a party that brought an unsuccessful Direct Contest (in order to disinherit the challenger) the Court must then make a determination as to whether the challenge, although unsuccessful, was brought without “Probable Cause.” A Court might very well find that there was “Probable Cause” notwithstanding the ultimate failure of the contest, i.e. “… the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery.” [Cal. Prob. Code Section 21311 2(b)]. This standard may be met even if the contest was ultimately unsuccessful. But there is also the danger that the Court will find that there was not “Probable Cause” and thereby enforce the No Contest Clause against the contestant.
Much of the literature dealing with No Contest Clauses talks about what constitutes “Probable Cause” and uses language such as “No Contest Clauses are ‘disfavored by courts'” and the like. A better way of looking at the question might be to understand that if a contestant brings a Direct Contest and loses, his or her fate as regards the No Contest Clause is now in the hands of the Judge. This is always a perilous business. If the contest was unsuccessful, that already may likely mean that the Judge did not see the issue the way that the contestant did. This may also mean that the Judge did not evaluate the Probable Cause the way that the contestant did. This is an example of what attorneys call the “hazards of litigation.” For this reason, if a contestant risks losing a substantial inheritance if he or she brings a Direct Contest, good legal counsel beforehand is absolutely essential in our view. This is not a straightforward area of law.
If you are contemplating a Trust Contest of any kind, Buffington Law Firm’s team of trust litigation attorneys invites you to contact us for an in-depth Free Legal Consultation. All consultations are with experienced trust litigation attorneys and are protected by the attorney-client privilege. Call us today!