Challenges to Trust That Affects Distributive Scheme May Violate a Trust's No Contest Clause

A no contest clause "essentially acts as a disinheritance mechanism, wherein a beneficiary may be disinherited if he or she contests or seeks to impair or invalidate the trust instrument or its provisions. Under the former law, section 21320 provided a safe harbor provision that allowed a beneficiary to apply to the court for a determination of whether a particular motion, petition, or other act by the beneficiary…would be a contest within the terms of the no contest clause. Under the former law's safe harbor procedure, the beneficiary would be able to make an informed decision whether to pursue the action based on the court's determination on whether the particular challenge would constitute a contest. However, the Probate Code was amended to eliminate the safe harbor mechanism.

In Donkin v. Donkin (--- Cal.Rptr.3d ---, Cal.App. 2 Dist., March 23, 2012), the beneficiaries filed a safe harbor petition to determine if their challenge of the Trustee's administration of the Trust would constitute a contest under the Trust's no contest provisions. While the beneficiaries' petition was pending, the Probate Code was amended to eliminate the safe harbor mechanism. The California Court of Appeal had to consider whether the law in effect at the time of the challenge applied or whether the new law that was passed while it was pending was applicable.

Stay tuned for additional discussion on the above subject matter.

*This blog entry was not written by an Attorney and should not be construed as professional legal advice.

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