Friday, November 24, 2017
Direct contests, property ownership challenges, and creditor claims are the three scenarios in which no-contest clauses are enforced in California courts. Direct contests to an estate plan usually involve allegations that the plan is invalid due to duress, undue influence, fraud, menace, etc. If a beneficiary brings one of these claims and fails to persuade the court that it is legitimate, then the no-contest clause may be enforced. There is an exception in California for beneficiaries that bring direct claims with probable cause. Property challenges involve claims alleging that trust assets do not actually belong to the trust. Creditor claims occur when a beneficiary is owed money by the decedent. Property challenges and creditor claims are not protected from the no-contest clause even when brought with probable cause. In certain circumstances, this means that beneficiaries with legitimate claims may be excluded from inheriting even if they win the underlying suit.
See Tyson E. Hubbard, Take It or Leave It: The Perilous Decision of Whether to Violate a No Contest Clause, California Trust and Estate Litigation, August 21, 2017.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.