No-Contest Clause Assistance from a Santa Cruz Legal Team
The attorneys at Penrose Chun & Gorman LLP represent clients in San Jose, Santa Cruz, and throughout the Monterey Peninsula in estate planning and probate, trust and estate litigation matters. We routinely advise our clients regarding the use and enforceability of no contest clauses in California.
What Is a No Contest Clause?
A no contest clause is a provision in an estate planning document such as a will or trust that states if a beneficiary chooses to challenge the terms of the document, that beneficiary will forfeit any gift or bequest under the document. The purpose of a no contest clause is to discourage beneficiaries from initiating litigation challenging the validity or the terms of an estate planning document.
Litigation over no contest clauses has been steadily increasing in California. There were only a total of 17 reported cases involving litigation over no contest clauses in California from 1900 to 1992. From 1992 to 2007, there were 26 reported cases in the appellate courts or State Supreme Court involving no contest provisions, with many other cases going unreported.
Changes in the Enforcement of No Contest Clauses in California
Senate Bill 1264 changed the enforcement of no contest clauses in wills and trusts. The law became effective on January 1, 2010 and effects estate planning documents which become irrevocable on or after January 1, 2001, regardless of when the instrument was actually signed. A trust becomes irrevocable under certain circumstances, including when the testator dies.
This law substantially changed the enforceability of no contest clauses in the following ways:
- Changed the actions beneficiaries who are subject to no contest clauses may take.
- Changed how parties will litigate disputes arising under instruments with a no contest clause. Before the enactment of this law, a petition would be filed with the court to determine if a particular action constituted a contest to the estate planning document. This declaratory relief procedure was eliminated.
- Changed how fiduciaries administering instruments containing no contest clauses respond to challenges to the instrument.
No Contest Clauses Will Only be Enforceable in California in Certain Situations
Under current law, no contest clauses are enforceable in three situations:
- A challenge to the transfer of property on the grounds that it was not the transferor’s property at the time of the transfer. This is referred to as a “forced election”.
- Filing or prosecuting creditors’ claims.
- A direct contest brought without probable cause. Probable cause is considered to exist if the facts known to the person filing the contest, at the time of filing the pleading, would cause a reasonable person to believe there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery.
Contact an Experienced Estate Planning Lawyer for Advice on No Contest Clauses
The estate planning attorneys at Penrose Chun & Gorman LLP draft documents designed to deter potential challenges and advise their clients on the enforceability of no contest clauses in probate, trust and litigation matters. Contact Penrose Chun & Gorman LLP to schedule a consultation today.
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Steven D. Penrose
Practice Areas: Estate Planning, Estate and Trust Litigation, Business Succession Planning, Probate Litigation, Estate and Gift Tax Planning, Estates and Trusts, Fiduciary Law, Powers of Attorney, Advance Health Care Directives, Real Estate Law, Entity Formation, Civil Litigation
Edward L. Chun
Practice Areas:Real Estate Litigation, Trust and Estate Litigation, Business/General Litigation, Civil Litigation
J. Kenneth Gorman
Practice Areas:Estate and Trust Litigation, Civil Litigation, Construction Defects Litigation, Personal Injury, Business Litigation, Real Estate Litigation, Agricultural Litigation
Anna M. Penrose-Levig
Practice Areas: Estate Planning, Civil Litigation, Estates and Trusts, Powers of Attorney, Advance Health Care Directives
Practice Areas: Estate Planning, Trust Administration, Probate Litigation, Civil Litigation