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Part III: Challenges to Trust That Affects Distributive Scheme May Violate a Trust's No Contest Clause - Part III

To continue the discussion on Donkin v. Donkin, the trustees appealed the trial court's decision. The Court of Appeal reviewed the case and stated that one of the issues that must be addressed was the particular law that applied to the case; which was, the safe harbor law in effect at the time the trust was created and the beneficiaries filed their petition, or the new law in effect after January 1, 2010. The court ruled that the former law applied since it is evident that the settlors extensively relied on the prior law. Furthermore, applying the new law would penalize the beneficiaries for following the law in effect at the time the petition was filed and place them unnecessarily at risk, resulting in an injustice that can be avoided by applying the former law.

The court then tackled the issue of whether the beneficiaries' challenge would constitute a violation of the no contest clause. The court concluded that several of the beneficiaries' challenges to the trust (i.e. challenges to Mary's ability to amend the trust, the Trustees' failure to make distributions, and Mary's failure to create sub trusts required by the original trust) would constitute a contest since they attack the distributive scheme of the trust. The court ruled other aspects of the challenge may also constitute a contest and should be reviewed by the trial court on remand. The court then affirmed the trial court's decision to the extent that it determined that the former law governing will contests and safe harbor petitions applied. Other aspects of the decision have been reversed and remanded. Both parties bore their own costs on appeal.

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

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