Michelman & Robinson

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In January 2010, the California legislature enacted new no-contest clause statutory provisions.  The new provisions, which do away with a "safe harbor" petition that was previously available to those seeking a possible contest, could affect your current will or trust.  Under the current code, an individual who petitions the court to contest a will or trust, must have probable cause to do so. 
 
What is a No-Contest Clause?
 
A no-contest clause is an express provision included in a will or trust which prevents someone designated as a beneficiary under that instrument from receiving an inheritance if he or she unsuccessfully challenges or "contests" all or part of the will or trust.  Estate planning clients generally include no-contest clauses in their instruments to deter their beneficiaries from obstructing the wishes of the deceased by challenging the validity of the estate share provided to them.

How Could the New Provisions Affect your Will or Trust?
 
The new bill has substantially revised the law governing the enforceability of no-contest clauses.  Under California Probate Code § 21311(a), a no-contest clause is only enforceable against:
 
            (1) Direct contests unless filed with probable cause;
            (2) Filing or prosecuting creditors' claims, whether or not probable cause for    the claim exists if the no-contest clause expressly provide so, or
            (3) A pleading challenging the transfer of property on the grounds that is was not the transferor's property at the time of the transfer, whether or not probable cause for the pleading exists, if the no-contest clause expressly provides so.
 
Probable cause exists if the facts known to the contesting beneficiary would otherwise cause a reasonable person to believe that there is a reasonable likelihood that the relief requested by his or her challenge would be granted by the court after an opportunity for further investigation or discovery. (California Probate Code § 21311(b)).
 
In other words, the code has changed the type of actions that beneficiaries who are subject to no-contest clauses may take.  In general, beneficiaries may only challenge the instrument if there is probable cause to do so.  In addition, the new law has altered how parties should litigate disputes under instruments that contain no-contest clauses and the choices available to fiduciaries administering instrument with no-contest clauses.
 
What Actions should you take in lieu of the new No-Contest Legislation?
 
If you have not revisited this issue yet this year with respect to your trust, will and beneficiary designated assets, you should do so.
 
If you currently have a general no-contest clause in your documents, the new legislation will apply the standard under which an individual can contest your trust and will to such no-contest clause if an individual does contest your will/trust. 
 
If you have disinherited a family member specifically, or wish to disinherit a family member, or have given unequal gifts to children or other beneficiaries, you should contact me to discuss the current provisions in your trust and will, and decide whether or not you should amend your trust and will.   If you are NOT concerned with a specific individual contesting your trust or will, the general clause will suffice and the new legislation will apply as discussed above.