Disinheritance and No-Contest Clauses in California 2023-02-07 2024-06-06 https://www.naimishlewislaw.com/wp-content/uploads/2020/02/naimishlewislogo.png Naimish & Lewis, APC https://www.naimishlewislaw.com/wp-content/uploads/2023/02/disown.jpg 200px 200px
The goal of estate planning is to ensure that a person’s wishes are effectuated at the time of their passing. Most people drafting an estate plan wish for their belongings to pass to those people who formed meaningful connections with them during their lifetime. The typical will or trust often provides distributions of the decedent’s estate to family members, friends, and other loved ones. The drafter can rest assured knowing their belongings have passed to those close to them for their future enjoyment.
However, not everyone lives in such a harmonious world. Sometimes effectuating one’s wishes entails specifically disinheriting certain family or “friends.” Other times, the creator of a trust or will believe that a certain beneficiary will not be satisfied with their inheritance and may attempt to challenge the trust or will, foiling their intent. In order to ensure that all of the person’s wishes are met and their intent effectuated, Disinheritance and No-Contest clauses may be used in their estate plan.
In general, a person wishing to disinherit someone can do so by simply not providing for that person in the will or trust. However, an explicit declaration of intent to disinherit, a “disinheritance clause”, can serve to make the drafter’s intent clear. Rather than leave the disinherited person wondering if their lack of inheritance was a mistake, a disinheritance clause in a will or trust provides a clear statement of intent.
Sometimes, the creator of an estate plan wishes to state the reasons for the disinheritance. For example, they may want to include a statement that their child is intentionally omitted from the trust because they “never took proper care of their goldfish.” Statements like these may not be advisable because circumstances may change, and the disinherited person may want to litigate on the issue due to the change in circumstances. The child in the example above may want to challenge the provision in court because he was taking much better care of the goldfish at the time of his parent’s death.
No-contest clauses are provisions included in trusts or wills designed to deter a challenge, or “contest”, of the trust or will. “Contest” is defined under Probate Code §21310(a) as a “pleading filed with the court by a beneficiary that would result in a penalty under a no-contest clause, if the no contest clause is enforced.” A typical no-contest clause provides that a beneficiary will forfeit whatever they would have received under the will or trust if they contest the will or trust. Probate Code §21310(c) defines a “no-contest clause” as “an otherwise valid instrument that, if enforced, would penalize a beneficiary for filing a pleading in any court.”
California has limited the enforceability of no-contest clauses to specific circumstances. Thus, a no-contest clause will not act as a broad deterrent for all contests on trust or will.
Further Reading » Estate Planning with Uncle SamProbate Code §21311(a) provides the three types of contests in which a no-contest clause will be enforced:
(1) A direct contest that is brought without probable cause.
(2) A pleading to challenge a transfer of property on the grounds that it was not the transferor’s property at the time of the transfer.
(3) The filing of a creditor’s claim or prosecution of an action based on it.
The most important of these limitations on enforceability is the requirement that a “direct contest” be brought “without probable cause.” Probate Code §21310(b) provides the six grounds on which a direct contest may be brought; (1) forgery; (2) lack of due execution; (3) lack of capacity; (4) menace, duress, fraud, or undue influence; (5) revocation; and (6) disqualification of a beneficiary under Prob C §6112 . Probate Code Section §21311(b) states that probable cause exists if at the time of filing the 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.” Thus, if a direct contest is brought with probable cause, the no-contest clause will have no effect. Further, if a contestant succeeds in the contest, they will still be granted their sought-after relief.
Let’s return to the goldfish example. Instead of leaving the child with nothing, the parent decides to leave the child with only $100 (to buy a new goldfish tank). If the child proceeds with a direct contest on the trust without probable cause and loses the contest, he will forfeit his $100 inheritance. However, if the direct contest is brought with probable cause, even if the child loses the contest he will not forfeit the $100. If he wins the contest, he could be entitled to an even larger distribution.
The example above highlights an important limitation of no-contest clauses. If the contestant is not set to receive anything under the trust or will, the no-contest clause will have no deterrent effect. A no-contest clause only works to discourage those who are entitled to some distribution from the trust or will. In the first example, where the child is completely disinherited, a no-contest clause would not work to deter him from contesting the trust.
Disinheritance and no-contest clauses can be powerful tools when drafting a trust or will, however, they are not perfect. There are many additional limitations on the enforceability of no-contest clauses that could not be covered in the span of a single article. Contact an experienced legal professional to learn more.
Mr. Tari is a junior associate in our Estate Planning, Trusts, and Probate Practice. Mr. Tari is committed to helping his clients plan for the future and navigate the complexities of the probate court. Mr. Tari understands that each client is an individual with their own specific set of circumstances. Mr. Tari is dedicated to understanding each client’s needs in order to provide the best representation possible.
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