Wednesday, February 5, 2014
The California Supreme Court ruled in Donkin v. Donkin that a construction challenge to the terms of a trust based on fiduciary misconduct by the trustees cannot be precluded by a no-contest clause because that clause was unenforceable. The Court found that the no-contest clause did not expressly provide that it applied to the transfer of property and was therefore not enforceable. Furthermore, the claim of the Beneficiaries was that the intent and fiduciary duties of the Trust were not being fulfilled and such a claim was outside the scope of the no-contest clause. The Court added that restricting no-contest clauses was aligned with public policy of "eliminating errant fiduciaries" and protecting the rights of "beneficiaries" to protect against misconduct.
See Linda M. Monje, Update: California Supreme Court Rules that a No-Contest Clause in a Trust is Unenforceable Except Under Specific Circumstances, JDSupra, Jan. 8, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.