Clients routinely want a no-contest clause in their estate plan just in case someone wants to challenge the estate. However, in the state of California there is not going to be an exclusive bar to challenge and there are some instances where you need to keep the option open for your beneficiary; you just don't want them to frivolously challenge because they are dissatisfied with their percentage or other aspect of their inheritance.
In its most recent ruling about wills and trusts, the California Supreme Court in Donkin v. Donkin (December 26, 2013) ruled that a challenge to a Trust does not trigger the Trust's "no-contest" clause.
In other words, the Donkin Trust beneficiaries may pursue their claims (a petition to compel an accounting, a petition to remove the Trustee, and a petition to compel Trust distributions) without risk of being disinherited, even if their claims ultimately fail. The probate court ruled that the claims would not trigger the no-contest clause. The appellate court reversed, in favor of the Trustee. The Supreme Court disagreed. So the regular court did not approve use of the no-contest clause and then it was taken up on appeal and they ruled it should be enforced and then things went to the state Supreme Court and they said no but also outlined certain situations where one should not be disinherited for bringing charge to the estate. One instance is where the Trustee may be behaving in a less than honorable manner and a beneficiary should be able to request accounting etc. even if it would be considered a bit hostile yet probable cause to challenge exits. In essence, it all depends on the nature of the challenge and is usually upheld for frivolous challenges e.g., where a person is unhappy with their percentage etc.
In reversing the court of appeal, the Supreme Court ruled that the Trust's no-contest clause was unenforceable both under the old law and the current law. Current Probate Code §21311 enforces no-contest clauses only in three specific cases: (1) a direct contest brought without probable cause; (2) a challenge to a transfer of property; or (3) the filing of a creditor's claim.
