Alert! Major Changes Made to California Will and Trust Contest Law Effective January 1, 2010
A “no contest” clause is a provision in a will, trust or other instrument, stating a person who contests or attacks the instrument will take nothing under the instrument, or in the alternative, may take a reduced share. California's no contest clause reform legislation (SB 1264) enacts major changes in the law governing enforceability of No Contest Clauses in wills and trusts. This legislation changes what actions beneficiaries who are subject to No Contest Clauses may take, how parties should litigate disputes under instruments containing No Contest Clauses, what choices fiduciaries administering instruments with No Contest Clauses will face, and how estate planners should draft wills and trusts as a consequence of these changes.
Under the new law, declaratory relief will not be available to omitted heirs. Up until now, omitted heirs could seek declaratory relief under Probate Code Section 21320 and obtain a preliminary ruling on whether or not a particular legal proceeding would violate a no contest clause. If the court found that it did not violate the clause, the beneficiary could proceed with the pleading without risk of being disinherited completely. This will no longer be possible.
Going forward, no contest clauses will only be enforceable in three situations. First, no contest clauses will be enforced against a direct contest brought without probable cause. A direct contest is one that alleges invalidity on the grounds of forgery, lack of due execution, lack of competence, menace, duress, fraud, undue influence, revocation in certain circumstances, and disqualification of the beneficiary as having witnessed the will or being a prohibited transferee. Second, no contest clauses will be enforced against a legal proceeding challenging the transfer of property on the grounds that it was not the transferor’s property at the time of the transfer (a forced election) if the no contest expressly provides, whether or not probable cause for the pleading exists. Finally, no contest clauses will be enforced against filing or prosecuting creditors’ claims, whether or not probable cause for the claim exists, if the No Contest Clause expressly so provides.
Although the statute will become operative January 1, 2010, it then will apply to any instrument, whenever executed, that became irrevocable on or after January 1, 2001.
Call us at (858) 259-7790 or contact us online.
Under the new law, declaratory relief will not be available to omitted heirs. Up until now, omitted heirs could seek declaratory relief under Probate Code Section 21320 and obtain a preliminary ruling on whether or not a particular legal proceeding would violate a no contest clause. If the court found that it did not violate the clause, the beneficiary could proceed with the pleading without risk of being disinherited completely. This will no longer be possible.
Going forward, no contest clauses will only be enforceable in three situations. First, no contest clauses will be enforced against a direct contest brought without probable cause. A direct contest is one that alleges invalidity on the grounds of forgery, lack of due execution, lack of competence, menace, duress, fraud, undue influence, revocation in certain circumstances, and disqualification of the beneficiary as having witnessed the will or being a prohibited transferee. Second, no contest clauses will be enforced against a legal proceeding challenging the transfer of property on the grounds that it was not the transferor’s property at the time of the transfer (a forced election) if the no contest expressly provides, whether or not probable cause for the pleading exists. Finally, no contest clauses will be enforced against filing or prosecuting creditors’ claims, whether or not probable cause for the claim exists, if the No Contest Clause expressly so provides.
Although the statute will become operative January 1, 2010, it then will apply to any instrument, whenever executed, that became irrevocable on or after January 1, 2001.
Call us at (858) 259-7790 or contact us online.
