No-contest Clauses, Wills and Lawsuits: Why in Estate Planning Small Details Really Matter
When somebody dies with an estate plan and a last will in place, the deceased person’s assets usually pass to the heirs smoothly and swiftly. But every once in a while things go awry, and the courts get involved. So it happened with a case that the 2nd District Court of Appeal in Los Angeles filed in November, Estate of Dayan.
The case hinged on a no-contest clause in the will of the testator, Margor Dayan. It tells the story of a fight between siblings. Here it is:
In 1986, Margor Dayan transferred interests in a piece of real estate located in North Hollywood to her trust and her children. This left one of the sons, Anthony, with a one-third interest in the property.
In 2009, she executed a last will conveying all her rights, title and interest in the property to the trust of her other son, Ermond. The will also included a no-contest clause that stipulated: If a person contested the will, then all legacies, bequests, devises and interests given under the will to that person “shall be forfeited as though he or she predeceased me without issue”.
The mother died in 2012 without having taking necessary legal steps to ensure that her last will could actually be executed according to her wishes. To do so she would have had to seek to quiet title to the property, i.e. file a lawsuit to quieten other people’s claims to the asset in North Hollywood.
After his mother’s death, Ermond, claimed a 100-percent right to the property. He tried to remove his brother as a personal representative of the estate. And he maintained that Anthony, in trying to assert his one-third interest in the asset, had violated the will’s no-contest clause.
Financial cost and emotional toll
The trial court decided in favor of the defendant: Anthony’s interest in the property was one-third. His efforts to protect that interest in the court proceedings did not violate the will’s no-contest clause.
Ermond appealed, but the appellate court affirmed the trial court’s decision. It argued that Anthony’s one-third interest stemmed from a deed executed long before the death of the mother. He was thereby relying on documents that stood separate from the will rather than challenging the terms of the will. He had not violated the no-contest clause.
For anyone involved in estate planning, the case brings home a couple of lessons.
First, details matter. How we draft documents and transfer property can affect the end result in significant ways. Margor Dayan had obviously hoped the no-contest clause would prevent litigation over her will. But it didn’t work out that way.
Second, court proceedings cost time, and in legal proceedings time equals money. (The court didn’t decide Estate of Dayan until four years after the testator’s death.)
In the end, and I’ve said this before, there’s also the question of another type of cost; family feuds more than any others take an emotional toll on all involved parties. Is it ever worth it?
By Kevin J. Moore