A “no contest” clause is a provision in a will, trust, or other instrument, stating a person who contests or attacks the instrument will take nothing under the instrument, or in the alternative, may take a reduced share. Thus, a “no contest” clause forces a contesting party to determine whether he/she should: take the gift as provided under the instrument, if any, or risk losing everything. Such a provision is intended to reduce litigation by disappointed heirs. The general rule in California provides that a no contest clause is enforceable. In Burch v. George, the court explained, “No contest clauses are valid in California and are favored by the public policies of discouraging litigation and giving effect to the purposes expressed by the testator.”1
Use of the California No Contest Clause
The law respects a person’s ability to control the use and disposition of their own property and does not require an estate plan be wise or fair. In Estate of Kitchen, the court stated, “[The] testatrix was at full liberty to dispose of her property as she saw fit and upon whatever condition she desired to impose, so long as the condition was not prohibited by some law or opposed to public policy.”2 Generally, persons transferring assets want to avoid litigation. Litigation is expensive, time consuming and hinder family relations. Additionally, a contest proceeding may bring to light “matters of private life that ought not to be made public.”3
No contest clauses can also avoid ownership disputes. In many instances, individuals in a second marriage will enter the relationship with significant separate property. Over time bank accounts become mingled, gifts are given, and community property is used to benefit separate property interests. What if community property and separate property title becomes blurred? A no contest clause allows the surviving spouse to make a choice between acquiescing in the decedent’s estate plan and forfeiting that amount to pursue her independent rights under community property law. “If the offer made in the estate plan is fair to the surviving spouse, she can save the estate money and time by accepting the gift offered (thereby effectively waiving any community property claim to purported estate assets).”4
Alternatively, there are many policy reasons why no contest clauses are disfavored. Generally, a person should have access to the courts to remedy a wrong or to protect their rights. A no contest clause works contrary to this policy by threatening a significant loss to a beneficiary who contests the instrument in court. Forfeiture is also disfavored as a matter of policy because the penalty is very harsh. Judicial proceedings may be necessary to ascertain the transferor’s intentions and a no contest clause preempts such inquiry. No contest clauses also interfere with the public policy favoring court supervision of executors, trustees, or other fiduciaries.5
Finally, as discussed above, a no contest clause can be used to force a beneficiary to either take whatever is offered under the transferor’s estate plan or forfeit that gift to pursue their independent interest in the estate assets. Forced elections can be fair, but there are reasons for concern as well. The beneficiary may settle for less than what is due. The estate plan may be inconsistent with the beneficiary’s own preferences. Unilateral disposition of community property is also contrary to public policy. California law disallows one spouse from gifting community property without the written consent of the other spouse.6
California Law Revision Commission’s Recommendation
In 2008 Senate Bill 1264 (Harmon) was introduced to implement the Commission’s recommendation for the enforcement of no contest clauses. Governor Arnold Schwarzenegger signed the bill into law on July 22, 2008. The law will go into effect on January 1, 2010 and will affect all instruments which became irrevocable on or after January 1, 2000.
Under the bill, declaratory relief is no longer available. Before, beneficiaries sought declaratory relief under Probate Code Section 21320. That provision authorized a beneficiary to seek judicial interpretation of a no contest clause to determine whether it would apply to a particular pleading. If the court found that it did not apply, the beneficiary could proceed with the pleading without risk of forfeiture, having a safe harbor. Now, beneficiaries will not be able to go to the court seeking judicial interpretation of whether the no contest clause applies or not.
Under 1264, no contest clauses are only legally enforceable in California under the three types of pleadings outlined below. First, no contest clauses will be enforced against a direct contest brought without probable cause. A direct contest is one that alleges invalidity on the grounds of forgery, lack of due execution, lack of competence, menace, duress, fraud, undue influence, revocation in certain circumstances, and disqualification of the beneficiary as having witnessed the will or being a prohibited transferee.7 Second, no contest clauses will be enforced against a pleading challenging the transfer of property on the grounds that it was not the transferor’s property at the time of the transfer (a forced election) if the no contest expressly provides, whether or not probable cause for the pleading exists. Finally, no contest clauses will be enforced against filing or prosecuting creditors’ claims, whether probable cause for the claim exists, if the no-contest clause expressly so provides.
1 Burch v. George, 7 Cal.4th 246, 254.
2 Estate of Kitchen, 192 Cal. 384, 388-89.
3 Estate of Hite, 155 Cal. 436, 441 (quoting Smithsonian Inst. V. Meech, 169 U.S. 398, 415 (1898)).
4 Burch v. George, at 265-266.
5 See, Estate of Ferber, 66 Cal. App. 4th 244, 253.
6 Fam. Code §§ 1100-1102
7 See Sections 21310(b) and 21311(a)(1).
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