Contesting Wills and Trust

We've all seen disturbing court battles over Wills and estates, and the ensuing litigation battles are reported throughout our media. Will and Trust disputes routinely arise when there is a disgruntled beneficiary who challenges the asset protection planning instruments instituted by the Trustor on the grounds of "undue influence" or "lack of mental capacity."

To begin with, when an individual prepares a Will, they seek out the services of an attorney. In most cases, an attorney who prepares a trust instrument or Will for a client does not conduct a competency test because it is "obvious" that the client is competent. If an attorney does conduct a competency test, they generally conclude, as a result of the test, that the client is competent.

However, even with detailed notes in the client’s file to the effect that the client was competent, and there are notes concerning the test that was administered and the questions and answers that were given, the attorney is ill equipped to fend off a challenge to a client's Will or Trust they've administered when a disgruntled heir files a Motion Seeking a Determination that the Proposed Action by a beneficiary does not constitute a "contest" within the meaning of a "no contest" clause in the instrument (see below information on this). The issue arises as to "why the attorney didn’t refer the client to a geriatric specialist" to determine the issue of capacity. This attack places the attorney who drafted the trust instrument or Will on the witness stand to testify as to his or her credentials, background, and experience in determining a client's capacity - a scenario most attorneys do not welcome.

Example: The "contest" referred to at left means that a beneficiary can dispute the dispositions of a Will or Trust as long as their dispute is not perceived as a "challenge" to the Will or Trust. A "no contest" clause is used to prevent challenges to a Will or Trust. Regardless of the attack concerning the competence of either the attorney or Trustor, the no contest clause acts as a potential danger to the beneficiary disputing the Will or Trust as they may well be disinherited due to the "no contest" clause. The following is an example of the "no-contest" clause that many attorneys have been using in Revocable Living Trust documents.

"Except as otherwise provided in this instrument, the Trustor has intentionally and with full knowledge omitted to provide for his heirs. If any beneficiary under this Trust, singly or in conjunction with any other person or persons, contests in any court the validity of this trust or of a deceased Trustor’s last Will or seeks to obtain an adjudication in any proceeding in any court that this trust or any of its provisions or that such Will or any of its provisions is void, or seeks otherwise to void, nullify, or set aside this Trust or any of its provisions, then that person’s right to take any interest given to him or her by this Trust shall be determined as it would have been determined if the person had predeceased the execution of this Declaration of Trust without surviving issue. The provisions of this paragraph shall not apply to any disclaimer by any person of any benefit under this Trust or under any Will."

The purpose of a "no contest" clause is to discourage beneficiaries from challenging Wills, Trusts, and other "dispositive" instruments by disinheriting all beneficiaries who challenge the instrument(s). The challenge is usually that the Testator was under "undue influence" from someone else or was not "mentally competent" when the instrument was prepared.

Whether the attack is on the Will, the Trust, an IRA or a Family Limited Partnership, it will attack the capacity of the testator (the person in whose name the Trust or Will is made) at the time the instrument is executed - either because the testator was not competent or because he or she was under "undue influence." Hence, the common method of attack is to file a P.C. Section 21300 Petition to determine whether or not "if" the beneficiary actually claims the desired asset, the claiming of this asset would subject him or her to the no contest clause. If the court rules that the beneficiary would be subject to this clause, then disinheritance is automatic and the beneficiary may decide not to challenge the disposition.

However, because the Probate Code provides a method by which a beneficiary can obtain a court determination as to whether or not his or her proposed action constitutes a "contest" within the meaning of the Will or Trust’s "no contest" clause; this time-consuming process, which necessitates a trial and an appeal has settlement clout because it can force the estate to incur large litigation fees. The estate attorney may well decide that it is worth settling the case for at least the amount that it would cost to litigate the matter. However, it is also possible that this litigation expense can be avoided with a tightly drafted "no-contest" clause.

In many cases, "no contest" clauses are omitted in trust instruments or Wills when they are "cookie-cutter" clause(s) instruments. In order to avoid litigation, estate planning attorneys may wih to consider broadening the "cookie-cutter" "no contest" clause he or she uses in any Will and or Trust. More importantly, to circumvent the argument that the Trustor or decedent didn’t really mean to designate a particular person named on the IRA account or to break up a Family Limited Partnership because the beneficiary does not want his funds to be "tied up," the estate's attorney may wish to insert a no contest clause into any buy-sell agreement, IRA agreement, 401(k) Agreement, or Family Limited Partnership he or she drafts because a s a general rule these instruments will not contain a "no contest" clause therefore may be open to attack by a family member who wishes to claim the assets. If thhese documents were executed at or about the same time as the trust instrument or Will, the attorney can argue that all of the documents form an "integrated estate plan."