With limited exceptions, a no contest clause may be enforced only against a direct contest brought without probable cause. Prob C §21311(a).
A direct contest is a contest that alleges the invalidity of a protected instrument on specified grounds, including forgery, lack of due execution, lack of capacity, and menace, duress, fraud, or undue influence. Prob C §21310(b)(1)-(4).
A will or trust contest that alleges the revocation of the instrument or the disqualification of a beneficiary also satisfies the definition of a direct contest. Prob C §21310(b)(5)-(6).
In Key v Tyler (2019) 34 CA5th 505, the appellate court construed a defense of a trust amendment that the trial court had found to be invalid as a contest alleging revocation of the trust. As a result, the court held that the trust’s no contest clause could be enforced against the person who defended the amendment.
The original trust provided that three sisters would share their mother’s trust estate equally. One sister persuaded the settlor to amend the trust to reduce the share of a second sister and increase her own share of the trust. The trial court concluded that the trust amendment was the product of undue influence.
The second sister then sued to enforce the trust’s no contest clause against the sister who secured the amendment. The trial court dismissed the action but the court of appeal reversed.
The court first held that even the act of defending a trust amendment may violate a no contest clause under historical case law. Good point!
The court also held reluctantly that the action was subject to a special motion to strike under the anti-SLAPP statute citing Urick v Urick (2017) 15 CA5th 1182. See Alas Poor Urick: SLAPP-stick Comedy Relieves Probate Court Drama. However, the court concluded that the second sister had established a reasonable probability of prevailing on the merits.
The court then held that the defense of the action was a direct contest of the trust as defined in the statute. The court reasoned that the trust amendment had the effect of revoking the trust with respect to the second sister’s interest under Prob C §15401.
But the actual effect of a trust amendment is quite different. Had there been an actual revocation, a portion of the trust property would have fallen into the settlor’s probate estate and passed under the settlor’s will or by intestate succession. Here the trust amendment provided for an alternative distribution of the trust property.
Some might have thought that only an actual alleged revocation would run afoul of the statute. Simply disputing the validity of a trust amendment shouldn’t risk a forfeiture of benefits under the original trust. At a minimum, the decision introduces another element of uncertainty into trust and probate litigation.
For more on will and trust contests, see California Trust and Probate Litigation, chap 5.
Check out other articles on estate planning.
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