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Hi, this is Stewart Albertson and we’re going to address an issue – the issue of No Contest Clauses one more time. We’ve addressed this several times in our videos in the past, but we think it’s an important issue to keep people aware of what the legislation is, in California, pertaining to No Contest Clauses.
So, a No Contest Clause is generally included in a trust, will, or both, and many people are familiar with them. They say that if you contest your parents’ wishes under the trust or will, that you are to be treated as you’re disinherited. The parent doesn’t want you contesting their wishes – what they intend to happen to their estate after they die – so these include these No Contest Clauses.
Generally speaking, No Contest Clauses do not apply. Except in one of three circumstances. The first circumstance is, if you challenge the terms of the trust based on undue influence, lack of capacity, duress, fraud, any of those type of doctrines, and you do so without probable cause, changes are that you’re going to be disinherited under the trust.
This is the first way that the legislation allows the No Contest Clause to be used against you but it does have a special caveat and that’s the Probable Cause exception. What that means is if you brought your trust contest based on undue influence, lack of capacity, fraud, duress, you brought that and you are reasonable in bringing that, and other people standing outside, looking at what you were doing at the time you brought the contest, as long as you look reasonable to the court, there’s a fairly good chance that the court will not hold the No Contest Clause against you.
But you’ve got to keep in mind, judges are people. Some judges, they may hold the No Contest Clause against you, where another judge, under the same set of facts, same set of circumstances, would not hold the No Contest clause against you.
So this is something you have to be careful of, if you’re going to file a trust contest under this first prong where you’re trying to invalidate a trust document based on undue influence, lack of capacity, fraud or duress.
There’s also two other ways that the No Contest Clause can be used against you. The second way is if you file a Creditor’s Claim against your parents’ trust or estate. And the No Contest Clause says that if you file a Creditor’s Claim, you’re hereby disinherited. So you do have to have the special language in the trust terms, in the No Contest Clause, before that would be used against you. So you want to make sure you pay attention to that. If you think you’re going to file a Creditor’s Claim against a trust or a will, because you believe your Mom or Dad owed you money, they promised they were going to pay you, and now you’re going to file a Creditor’s Claim? You better take a look at the No Contest Clause to make sure it doesn’t say if you file a Creditor’s Claim against the trust or estate, you’re hereby disinherited. Please note, that under this prong of the No Contest Clause, there is no probable cause exception. In other words, if you file a Creditor’s Claim, you’re done! It doesn’t matter how reasonable you were in bringing that Creditor’s Claim.
The third way you can get the No Contest Clause to disinherit you – and we’re seeing this one more and more – is where you allege, in some pleading with the court, that your Mom or Dad didn’t have the authority or control or ownership of property to actually transfer that property to their trust. I’ll give you an example. Let’s say that there’s a husband and wife and the wife is completely demented, she has Alzheimer’s, she’s still alive, but she no longer has decision-making authority or testamentary capacity. And Dad decides to revoke all of their old trust, which has all community property in it, and create a new trust that he creates and he moves all of that property into the new trust, which includes his one-half of the community and his wife’s one-half of the community. And he puts it all in a new trust and in that new trust, he only gives all of those assets to one sibling. If you’re one of the siblings that’s not getting, you have to be careful. Or, if you’re getting something of that trust, say $100- or $200,000, you want to seriously consider whether you want to file your Petition saying that Dad did not have the power or ownership or authority to transfer Mom’s one-half of the community into his new trust. You want to seriously consider that because once you’ve done it, you’ve triggered the No Contest Clause. And, under this prong, you also do not have a Probable Cause exception. Meaning, it doesn’t matter how reasonable you were in filing your pleading with the court, challenging the transfer of the property to the trust, saying that Dad didn’t own this property, you’re more than likely going have triggered that No Contest Clause and be disinherited.
But, keep in mind, these No Contest Clauses are real. Many lawyers think they don’t apply any more. But the truth is, they don’t apply under most circumstances, but they do under the three circumstances I just described. So you want to take a careful look at them and make sure they don’t turn around and bite you in the rear.