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Posted by: Kim_Hamilton on 08/17/2011 04:58 PM
Updated by: Kim_Hamilton on 08/17/2011 04:58 PM
Expires: 01/01/2016 12:00 AM
:
The No Contest Clause and California Law ~by Alan Horvath, Arttorney At Law
Alan Horvath is an attorney practicing elder and estate law in San Andreas. His articles are comments based on problems that periodically confront his clients. Your feedback is welcome 754-5291....The No Contest Clause is a fairly common provision in Wills and Trusts. Its basic goal is to say that anyone who contests the Will or the Trust gets nothing in the way of an inheritance. The idea was to discourage objections by heirs which end up creating huge legal expenses for the estate and thus eat up everyone's intended share. From the stand point of the individual writing the Will or the Trust, it sounds like an admirable goal. Unfortunately, few things in the law are that black and white. And to make matters worse, the California Legislature has prohibited No Contest clauses except in very restricted circumstances, REGARDLESS OF WHAT THE WILL OR TRUST SAYS.....
If you are counting on a No Contest clause to matter in the administration of your estate, you need to understand what the law does and does not allow.
Before we jump right in to details, I think it is helpful to put the question in perspective. A Will or a Trust is a set of instructions to the Executor or Trustee respectively. The document puts someone in charge of the estate, and then tells them what to do. Many people I talk to are under the mistaken impression that a No Contest clause is a tool to enforce the authority of the Executor or Trustee. IT IS NOT.
Under California law an executor or trustee has a responsibility not only to follow the instructions of the document, but equally to look after the best interests of the beneficiaries. And the responsibility extends to requiring the executor or trustee to put the interests of the beneficiaries above his or her own. The executor or trustee is often also a beneficiary. And the executor's interests as a beneficiary are often in conflict with those of other beneficiaries. So you can see that in terms of the overall legal framework, it would be inappropriate to allow an executor or trustee to appoint themselves as the sole interpreter of the document. In the language of the court, that is against public policy and any attempt to do it is void.
As constrained by California Law, the most a No Contest Clause can do is disinherit someone for bringing a groundless contest of the validity of the document itself. Contesting the interpretation of the document cannot be penalized. Nor can contesting the actions of the trustee or executor. A large percentage of contests have to do with a question of what the document means. A No Contest clause is of no use in such a case.
In fact, under current law, any beneficiary is entitled to bring a court action questioning the interpretation of the language in a Will or Trust. The law specifically forbids any penalty being assessed against a beneficiary for bringing such an action, and voids any provision in the Will or Trust that attempts to create such a penalty.
Bottom line, your executor or trustee has no special standing in the eyes of the court when it comes to the interpretation of the document. Even though you may have had long
conversations with your executor or trustee as to what you wanted, it is the document that the court will start with, and any beneficiary's reasonable interpretation of the language will be heard by the court.
So as the author of a Will or Trust, what are you to do. First, you must understand that clarity of language is of the utmost importance. A poorly written document will not be saved by a No Contest clause.
There are two other typical forms of a contest which have different characteristics altogether, but before we leave the question of document interpretation, it is important to take a side trip to another common inclusion in a Will or Trust. That is the idea of leaving someone $1. There are an awfully large number of people who have somehow gotten the idea that they have to leave family members something, and so if they don't really want to give them anything they will leave them a dollar. This is just making your problems worse.
There is no legal requirement that you leave anything to anyone. There can be a question raised as to whether you simply forgot to change your will along with changed circumstances. So someone might claim they are not in your will because you forgot them. It's a pretty lame argument, but it has worked in special circumstances. The solution to this is to simply name your family members as family members, and then go on to make your gifts to anyone you choose.
If you were paying attention so far, you will have noted that an executor or trustee owes a duty to a beneficiary. This duty arises because the document leaves something to that person, NOT because they were a relative. So, as soon as you leave $1 to someone, you have just given them significantly more standing to object than they would have had otherwise. Don't do it.
Now we have talked about document interpretation. What other forms of objection can there be. Well some people think they can object to a Will or Trust on the grounds that they deserve something. If we are talking about a legal debt, then the answer is they can object. And their "objection" will be heard. But in hearing the claim, the court is not even thinking about a No Contest clause. This is not a contest of the Will, but a pre-existing claim that simply survives death and is still owed by the estate. The court will enforce the claim, and there is nothing you can legally do in a Will or a Trust to avoid paying your debts.
On the other hand, if we are talking about an estranged son who thinks because he is the son he "deserves" something, there is just no such right imposed by law. You cannot prevent a person from bringing a meritless claim in life or in death. But the appropriate legal action to such a claim is what is called a "demurrer". That is legal jargon for "So what". The estate's attorney files a "So What" pleading with the court, and if the judge agrees, the claim gets thrown out. It is not a perfect solution, but it is much, much better than having to fight a contest in a trial. It's the best the system can do and it does not require a No Contest clause to use it.
Finally, a disgruntled relative could bring what the law calls a "Direct Contest". This is a claim that the document is just invalid. It is a claim that either the person lacked competence to understand what they were doing, did it under duress, or didn't do it at all because the document was forged. Public policy is again not going to allow the courts to arbitrarily throw out such a claim, since it goes to the heart of the question of whether the purported document even represents your wishes.
Under current California law, a "Direct Contest" is not prohibited. The courts WANT a document thrown out if it is truly invalid. However, under the law, a No Contest clause will be enforced IF a Direct Contest is brought, AND the court decides it has no merit. So, the No Contest clause is still worth having, IF it conforms to the new law. But only in this one very limited circumstance.
In summary, I want to acknowledge that a discussion of estate administration issues is by its nature dry and obtuse. If you have made it this far, I thank you for your interest. The key points I hope you have gotten for your effort are as follows:
A Will or Trust that is not clear is going to be contested. A No Contest clause will not prevent that.
Your beneficiaries are legally entitled to ask the court to interpret your Will or Trust. A No Contest clause will not prevent that. Your beneficiaries are anyone who is left anything by the language of the document.
No relative has any legal right to any part of your estate simply by blood, adoption, or marriage. Such a claim can be thrown out by the court. A No Contest clause is not necessary to allow that.
If a beneficiary claims that your Will or Trust was a product of lack of capacity, undue influence, or fraud, AND the court finds that claim to be without probable cause, AND your Will or Trust has a No Contest clause explicitly conforming to this language, it will be enforced.
In the final analysis, what matters is that the document be the product of your free will, and that it leave a clear set of instructions. The courts are going to require that your Trustee or Executor follow the instructions you have given them IN THE DOCUMENT. If the document is not clear, it is going to end up being interpreted by the courts.
If you really want to give your executor or trustee complete free reign, you can do that, but that is another whole topic altogether.
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