To comprehend the application of no contest clauses in California, attention must be directed to Probate Code Section 21310, et. seq. This statute delineates the constraints imposed on the effectiveness of a no-contest clause. These clauses, despite their presence in a legal document, can only be enforced under three specific circumstances:
- Initiating a direct contest of a protected instrument without probable cause;
- Initiating legal proceedings to contest the transfer of property by asserting that the property in question did not belong to the individual making the transfer; and
- Filing a creditor’s claim or prosecution based on the creditor’s claim.
A. Direct Contest of a Protected Instrument Without Probable Cause
The most common instance of enforcing a no contest clause in California being applied under Probate Code Section 21310, et seq. is when a direct contest of a protected instrument is brought without probable cause. Under this scenario, for a no contest clause in California to be enforced, the following elements must be proven:
- There has been a direct contest;
- The direct contest was of a protected instrument; and
- The direct contest was brought without probable cause.
It is crucial to note that these scenarios are only relevant if the contested document contains a no-contest clause. The consequence of triggering such a clause is disinheritance. However, if the will or trust being contested lacks a no-contest clause, challenging it will not result in disinheritance. Additionally, a no contest clause is only enforceable as to the latter two types of contests if the clause expressly provides for that application.
Direct Contest: Challenging Validity
A direct contest involves challenging the validity of a trust or will based on the following factors:
In order to be a direct contest, it must be alleged that a protected instrument is invalid or one or more of its terms are based on one or more of the following grounds: (1) forgery; (2) lack of due execution; (3) lack of capacity; (4) menace, duress, fraud, or undue influence; (5) revocation of the trust under Probate Code Section15401; and/or (6) disqualification of a beneficiary under former Probate Code Section 21350 or Probate Code Section 21380. Prob. Code Section 21310(b).
Definition: Forgery involves the creation, alteration, or imitation of a document with the intent to deceive or defraud.
Implication in a Direct Contest: If a contestant alleges forgery as a basis for challenging the validity of a trust or will, it implies that the document’s execution involved deceptive practices.
Lack of Due Execution:
Definition: Lack of due execution refers to failure to properly follow the legal requirements for creating and executing a valid will or trust.
Implication in a Direct Contest: Contesting a document on the grounds of lack of due execution suggests that the document may not meet the necessary legal formalities.
Lack of Capacity:
Definition: Lack of capacity implies that the individual creating the will or trust did not have the mental capacity to understand the nature and effect of the document.
Implication in a Direct Contest: Challenging a document for lack of capacity questions the mental state of the person creating the document, suggesting they were not competent at the time.
Definition: Duress involves coercion or pressure applied to force someone to act against their will.
Implication in a Direct Contest: Alleging duress implies that the person creating the document was compelled or coerced, impacting the voluntariness of their actions.
Definition: Menace refers to threats or acts intended to cause fear or harm.
Implication in a Direct Contest: Contesting a document based on menace suggests that the individual creating it was under threat or intimidation, influencing the document’s validity.
Definition: Fraud involves intentional deception to secure unfair or unlawful gain.
Implication in a Direct Contest: Contesting a document for fraud suggests that the document was created or executed with deceptive intent, impacting its validity.
Definition: Undue influence occurs when a person uses their power to manipulate or coerce someone into making decisions against their own interests.
Implication in a Direct Contest: Challenging a document on the basis of undue influence implies that the creator of the document was subjected to manipulation, affecting their ability to make independent decisions.
Definition: Elder abuse involves harming or exploiting an older person, often through physical, emotional, or financial means.
Implication in a Direct Contest: If elder abuse is cited as a factor, it suggests that the individual creating the document, who is likely elderly, was subjected to mistreatment that influenced the creation of the document.
Revocation of a Will or Trust:
Definition: Revocation refers to the act of canceling or annulling a will or trust.
Implication in a Direct Contest: Contesting a document based on revocation suggests that the document in question was either intentionally canceled or rendered invalid.
Disqualification of a Beneficiary (Caregiver or Drafter):
Definition: Disqualification refers to rendering a beneficiary ineligible to receive benefits.
Implication in a Direct Contest: Challenging a document on the basis of disqualification implies that a beneficiary, typically a caregiver or drafter of the document, should be excluded from receiving benefits.
In determining whether a direct contest has occurred, it must be determined whether said contest was against a protected instrument as defined in Probate Code Section 21310(e). Probate Code Section 21310(e) defines a protected instrument as an instrument that: (1) contains the no contest clause; or (2) 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.
California law is well settled on the issue that a no contest clause is strictly construed and cannot be enforced to challenge a subsequent amendment that did not specifically mention the no contest clause. A statement in the provision containing the no contest clause that defined a protected instrument to include amendments to the trust agreement could not trump the statutory requirement that a no contest clause must be specifically referenced in a future amendment to be enforceable. Simply put, the instrument being contested must include the applicable no contest clause.
Probable Cause Exception
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. Suppose a direct contest is based on facts suggesting a reasonable likelihood of winning after further inquiry and discovery. In that case, the no-contest clause may not apply even if the legal challenge is unsuccessful. In such cases, an argument can be made that probable cause existed and disinheritance should not occur.
B. No-Contest Provisions and Property Transfer Disputes
No-contest provisions similarly apply to disputes concerning the transfer of property, specifically when contested because the property did not belong to the transferor at the time of the transfer.
In accordance with Probate Code Section 850, Probate Courts possess jurisdiction to adjudicate property title conflicts associated with trusts or probate estates.
If a no-contest clause is specified in the trust and the trust expressly provides for this application, it is likely to be triggered without the possibility of the probable cause exception.
C. No-Contest Provisions and Creditor’s Claim Dilemma for Beneficiaries
Beneficiaries facing a no-contest clause prohibiting filing a creditor’s claim must carefully weigh their options. Filing a creditor’s claim can lead to the loss of beneficial interest in the estate. Once again, a no-contest clause is specified in the trust and the trust expressly provides for this application. In such situations, the probable cause exception does not apply, and beneficiaries must choose between their beneficial interest and pursuing a claim against the estate.
When facing the potential application of a no-contest clause in a Will or Trust in California, a meticulous analysis is necessary. Beneficiaries and/or trustees facing legal challenges in California must comprehend the intricacies of the document’s language and grasp the precise situations triggering the clause under the California Probate Code. In this complex legal landscape, the representation of OC Trial Group, APC, becomes invaluable, and offers the expertise of a knowledgeable team comprising vastly experienced probate and trust litigation attorneys. Their wealth of knowledge ensures that beneficiaries and/or trustees are well-equipped to navigate and address potential legal complexities with confidence and precision. Contact us today at (714) 202-2640.