No Contest Clauses

by Michael D. Larsen

People often misunderstand what a “no contest clause” can do. I have had beneficiaries of trusts come to my office and complain that they cannot question the trustee’s actions because of a no contest clause in the trust document. In California, this is not true. The Probate Code on no contest clauses is a little complicated, but its purpose is to discourage people from questioning whether the trustor–the person who created the trust–knew what he was doing when he signed the trust. If you think your grandfather Thomas was bamboozled by your cousin Luke into giving Luke more money in the trust, you may want to challenge the trust when your Thomas dies. If there is a no contest clause in the trust, you may lose whatever inheritance you have through the trust if you challenge the trust by saying that Thomas did not really mean to leave so much money to Luke.

But the no contest clause does not prevent you from saying that the trustee of the trust, who took over when your grandfather died, is acting improperly as trustee. Let’s say that Thomas also stated that Luke would act as trustee once Thomas died. (It’s not unusual for a trustee to also be a beneficiary.) If Luke acts improperly as trustee–say by refusing to provide an accounting required by the trust–you should still be able to challenge Luke’s actions as trustee.