No-Contest Clauses may not be effective unless properly inserted in most recent trust or will instrument

A no-contest clause or in terrorem clause, should be carefully drafted and implemented in estate planning to avoid potentially catastrophic consequences.  Such a clause can punish a person from filing a pleading in any court and result in disinheritance.  

Some people and some estate planners may insert a no-contest clause in the initial trust or will instrument and then years later draft an amendment to a trust or a codicil to a will or even a new instrument.  However, if the subsequent instrument does not include a no-contest clause or is not drafted properly to reference a prior no-contest clause then it may not be protected.  Also, if the original instrument does not properly refer to subsequent instrument(s) then such instrument(s) may not be protected.  This can be very problematic as a no-contest clause only applies to "protected instruments" under Probate Code section 21310.  Again, many no-contest clauses do not apply to future instruments (as such are not contemplated) and many amendments or subsequent wills may revoke prior instruments in their entirety. 

Even in situations where prior instruments are referenced as being given full effect, no-contest clauses have generally been narrowly construed and found to be ineffective.  The recent Court of Appeals case in Aviles v. Swearingen (2017) 2d Civil No. B281420, provides a prime example.  In that case a restatement and amendment of a trust incorporated terms of a prior trust (which had a no-contest clause) but did not specifically include a new no-contest clause, nor did it cite specifically to incorporating the old no-contest clause.  

If you find yourself in a litigation situation or potential dispute, it is best to consult with experienced counsel in such matters, such as the attorneys at the Demiris Law Firm to help guide you.

Can a No-contest Clause in a California Trust affect a separate Will, Power of Attorney, or group of contracts and deeds? The answer may shock you - YES it can.

 

                Many people believe that a “no contest clause” is limited to the legal instrument that it is written into.  For example, if there is a trust and that trust has a “no contest clause,” then a person may believe that only the trust is affected by the “no contest clause.”  In reality other instruments, such as a will, powers of attorney, or even contracts may be affected by the “no contest clause” in the trust – and vice versa, depending on the language of the "no contest clause" and the other instrument or classes of instruments identified.

                Under California Trust Law a “no contest clause” is defined as a provision in an otherwise valid legal instrument that, if enforced, would penalize a beneficiary for filing a pleading in any court.  California Law in this instance defines a “pleading” as a petition, complaint, cross-complaint, objection, answer, response, or claim.  A “protected instrument” is defined in CA Trust Law as either 1) an instrument that contains the “no contest clause” or 2) an instrument that 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.”  In other words, a “no contest clause” contained in a trust, could just affect the trust, but if it identifies a separate instrument (will, power of attorney, contract) in existence on the date the trust is created, then it could affect the other instrument(s).  If the “no contest clause” refers to an “identifiable class of instruments” such as “estate planning documents” or “contracts” or “deeds” then it could likely also affect those identifiable classes of legal instruments.